How Does a Car Become a Total Loss?
A total loss occurs when the amount of money needed to fix a damaged car exceeds the value of the car prior to the accident. Insurance companies send out a representative to evaluate the damage and determine the cash value of the car.
A representative uses both of these values to determine whether or not your vehicle qualifies as a total loss vehicle. Each insurance company will use their own values and percentages to determine the car’s status. When car repairs exceed a certain percentage relative to its cash value, the insurance will declare it a total loss. This percentage varies by insurance company and state. Typically 75-100% more of the car’s value results in a total loss.
If you have an older car such as a 15-year-old Honda Civic, your insurance may deem it a total loss when it only has minor damage. The total loss formula compares the value of the car vs the amount it would cost to repair it. Since older vehicles typically have a lower value and repairs costs can be high, often older vehicles are total losses. Alternatively, a new luxury car might not result in a total loss even with severe damage.
What Coverage Do You Need in Your Policy for a Total Loss to be Covered?
This will depend on who was at fault for the accident. If the other driver was at-fault their policy will cover the damages. Though the other driver’s insurance company will cover your damages, in this case, you will still need to submit a claim to your own insurance company. For an at-fault accident, collision coverage can cover any damages to your vehicle.
Collision coverage is an add-on insurance option that covers all damage sustained to your vehicle in an accident. This coverage pays for vehicle damage regardless of fault. If you get into an accident you can make a claim against your own insurance if you are at-fault. Additionally, if the at-fault driver’s insurance doesn’t cover your damages, you can file a claim.
No-fault vs Standard Liability Insurance
Some states offer no-fault car insurance which means that the insurer will pay for certain damages regardless of fault. Utah is one of those states however, their no-fault policies are restricted to medical treatment. In traditional states, liability insurance will be based on negligence. This means that your damages will only be covered if someone else was at fault.
If My Car is Declared a Total Loss by My Insurance Can I Still Drive it?
Initially, after the declaration of your vehicle as total loss by your insurance company, they’ll provide a cash offer. This should be the actual cash value of your car plus its salvage value. If you accept this offer, you essentially sell your vehicle to the insurance company.
Your other option is to choose to keep your vehicle. If you opt to keep your vehicle, the insurer will pay you the cash value of the car. However, the insurance company must report your car as a total loss to your state’s motor vehicle department. This means that your car’s title will be labeled as a salvaged title. Having a salvage title means that your car by law is currently only good for parts and cannot be driven.
How Do I Clear a Salvaged Title on My Car?
You must repair your vehicle before you can even consider getting the salvage title cleared. After repairs have been completed, you’ll need to visit your state’s motor vehicle agency to have an inspection.
If your vehicle passes the inspection, you will receive a new title for your vehicle. However, the new title will not erase the car’s history. This means that if you choose to sell your vehicle in the future, anyone can look up the car’s history. Having this history makes your vehicle significantly more difficult to sell.
What are the Risks of Keeping a Vehicle the Insurance Declared a Total Loss?
When you get your car inspected for the removal of the salvaged title, the inspection checks only for stolen parts and does not inspect the car for safety. In other words, the inspection doesn’t verify whether or not your car is safe to drive. They also don’t check whether or not the airbags are fault or check for structural damage. Therefore, if you pass the inspection and have a new title for your vehicle, have an experienced mechanic inspect your vehicle. You may want to have the mechanic check out your vehicle before getting the inspection for your title.
The last disadvantage may be the most important, most insurance companies will not insure a vehicle with a rebuilt title.
If Your Car is Totaled, Can You Receive More Than Your Car is Worth?
When you enter an auto insurance policy, you sign a statement that you cannot force your insurer to pay more than your car is worth in the case of a totaled vehicle. However, most states require insurance companies to make their clients “whole”. This means they should be restored to the same financial position they were in prior to the accident.
Can I Refute the Insurer’s Declaration of My Car as a Total Loss?
If you disagree with the assessment of your vehicle, you can negotiate with your insurer or file a lawsuit. If you choose this, you will need to have hard evidence that your car’s worth exceeds the insurer’s evaluation. You will also need evidence of the shape and condition of your vehicle prior to the accident.
The best way to prove a higher value of your vehicle is to provide reasonably current photos of the car. If you upgrade your car, you should take photos to maintain a current documentation of your vehicle’s condition.
To provide proof for a higher cash value for your car, you will need to hire a qualified appraiser. You need to have a live testimony from a qualified expert in regards to your car’s value. Finding a higher value online for your vehicle will not be sufficient evidence to dispute an assessment.
Additionally, you can request a report of the evaluation of your vehicle and look for any inaccuracies such as incorrect mileage, vehicle age or lack of non-standard features for your car. You may also need to provide all paperwork for your vehicle including mechanical reports, repairs, upgrades, etc. If you do find inaccuracies, present them to your insurance company and ask for another assessment.
My Car was Totaled and I Haven’t Paid Off the Loan, What Do I Do?
Within your lease agreement, you’re required to maintain the vehicle in near perfect condition. Having an accident in which your vehicle is totaled may result in you owing more than the vehicle is worth. However, with most vehicle leases, they require you to carry gap insurance on your insurance policy. Gap insurance covers situations where your loan has a higher balance than your car’s cash value. Basically, if you have a car loan for $35,000 and your car’s settlement is $28,000, gap insurance will cover the remaining $7,000 which remains on your loan.
The other kind of insurance coverage that helps with this situation is Loan/Lease Payoff coverage. However, Loan/Lease Payoff coverage has limitations based on a percentage of the car’s value. With the previously mentioned $35,000 loan, Loan/Lease Payoff coverage may only pay 25% of your vehicle’s value $7,000 (25% of $28,000). In our example, expenses are still covered but if the car was valued lower at $20,000, Loan/Lease Payoff coverage would only cover $5,000 meaning you would be left to pay the remaining $10,000 left on your loan.
I Accepted the Insurance Company’s Offer, What Happens Now?
If you choose to accept your insurance company’s assessment of your vehicle, you will need to remove your personal items. You should also remove your license plates from your vehicle. You will need to fill out paperwork that transfers ownership of the vehicle to the insurance company. These forms will need to mail this paperwork along with the car’s title and all copies of your car’s keys.
Were you or someone you know involved in a recent auto accident? Call Auto Accident Care Network now at 801-683-1948 to connect with a live care advocate. Our team at AACN can connect you to trusted attorneys and doctors to schedule a free legal consultation, a free thirty-minute massage, and a no-cost medical exam!