When we think about what a total loss vehicle looks like, we picture cars mangled into unrecognizable forms. While this sometimes is exactly how a total loss accident happens, sometimes it’s less dramatic but can be just as complicated. Depending on the value of your car, even a minor accident can result in a total loss, which means you are out of a car. If this happens to you, you need to know what kind of coverage you have that will help cover your losses and how to work with your insurance company to get you back on the road.
What Exactly Is A Total Loss?
Anytime a car is considered a total loss, the insurance company says that the cost to repair your car exceeds what it’s worth. There are three factors that your insurance company is looking at when trying to determine if your car is a total loss: the value of your at the time of the accident, the cost to repair your car, and how much a salvage yard is going to pay for your damaged car. There is a formula that most insurance companies follow to come to a conclusion. Your car is a complete and total loss if the cost to repair it is more than the value at the time of the accident minus the amount the salvage yard would pay for it. An example is helpful is here.
Let’s say your car value is $10,000 dollars at the time of the accident and the cost to repair it is $9,000. It seems like it makes more sense for the insurance company to pay $9,000 to repair your car rather than pay you $10,000. But you have to facto in how much the salvage yard will pay for it, which we will say is $1,200. So if your insurance company pays you $10,000 they will also be receiving $1,200 from the salvage company making it more attractive to total your car rather than fix it. They end up saving money. And anybody that’s ever been to an auto body shop knows that you go in planning on spending $50 and come out owing $150. Repairs on a vehicle especially if involved in a serious accident, are likely higher than an estimate and can end up costing the insurance company and you more money than you wanted to put into the car.
Determining Value of Your Car
To come up with a total loss, your insurance company is going to have to determine the value of your car before the accident but you want to make sure that they are getting correct information. If you ever make any kind modifications that would raise the value of your car, be sure to keep pictures and other forms of documentation in a safe place. Even if they are minor, they can matter when the insurance company is trying to come up with a fair claim. On their side, they will likely contact several dealers to find out what your car would have sold for before the accident.
This is why they need to know any information that would have raised the resale value of your car. Ask the insurance company to obtain at least three estimates but be aware that the dealers may give them a rate that’s lower than the estimated book value. This is why you can also do some research of your own. Call around to dealership and speak to the used car managers, who will provide a more accurate quote than a salesman. Look in papers for cars like your for sale and factor in any kind of improvements you made. The better documented your information is, the more valid of a claim you have on the pre-existing value of your car.
Getting Paid By the Insurance Company
Total loss claims can often take longer than a normal claim so you want to make sure that you report damage as soon as it happens. Be sure to gather all the standard information for making a claim because after you enter it, you are going to be busy working to gather more information to determine the value of your car. During this time period, you may also need a way to get around so hopefully you have rental coverage on your insurance. This can pay for your rental car while the insurance company is processing your claim.
The insurance company is going to use adjustor to determine the amount of damage and offer you a settlement for your car. If you think that the number they offer you isn’t fair, don’t be afraid to use the research you gathered previously. If you can make a sound argument and prove the car is worth more, the insurance company may listen to you. They are required by law to give you a fair price and it’s more of a headache for them to go to court rather than pay you what you deserve so it’s likely you will be fairly compensated.
You should also know that just because the insurance company wants to total loss your car doesn’t mean you have to accept their offer. You can keep your damaged car if you want. Many people do this for several reasons. There may be sentimental value attached to the car or they may know someone who can perform auto labor at a deal.
If you do choose to keep your car, you will be paid what the pre-existing value of the car was minus what the salvage shop would have paid. To use our previous example, if you kept your totaled car, you would have your car and $8,800 to fix it up. It’s best to consider your situation before making this decision but it’s a valid option to know about if you ever find yourself in this situation. A car accident can be a stressful time period and knowing how your insurance company will respond can lessen the impact.