If you have been involved in a car accident and your vehicle suffered a lot of damage, you are probably wondering whether your car will be totaled. When your car gets totaled, the insurance company reimburses you for the value of the car, and they take ownership of the wrecked vehicle. So, just when is a car considered a total loss? The answer depends on the state where you live and your insurance company. State law sometimes dictates when a car must be totaled, but insurance companies can also set their own rules as long as they meet the minimum legal requirements. If you think your car might be totaled, then keep reading. We will tell you when a car is considered totaled and how to handle the insurance claim process.
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When Is A Car Considered A Total Loss?
Are you wondering, “What makes a car totaled?” The answer varies by state and insurance company. Most states have laws that govern the amount of damage required for a car to be considered totaled. However, your auto insurance policy may have some additional language that adds more strict rules. Your insurance policy may require the vehicle to be totaled even with a lower amount of damage than state laws require. Let’s look at an example.
Some states have laws that require a vehicle to be totaled if the cost of repairs exceeds 75% of the actual cash value of the car. For instance, if the value of your car is $10,000, then the car would be considered a total loss if the repairs would cost more than $7,500. However, your car insurance policy might state that the limit is 60%. Therefore, in this example, the car would be totaled once the amount of damage reached $6,000.
There are also other formulas that are used by some insurance companies. One formula uses the salvage value and the cost of repairs to determine when the car is totaled. Typically, the insurance company will find the sum of the salvage value and the cost of repairs. If this sum is higher than the actual cash value of the vehicle, the car will be considered a total loss. The reason for this is that they could sell the car to a junkyard and get some money for it. How much do junkyards pay for cars? The answer is anywhere from $200 to a few thousand, depending on the make, model, and usability of certain parts.
If you have questions about your situation, you should always refer to the language in your insurance policy. Your policy will determine the criteria for a totaled vehicle. Your insurance company must follow state law, but they have the freedom to enact policies that are more strict than state law in most cases.
Determining The Value Of A Totaled Car
So, how will your insurance company determine the value of your totaled car? First, you should read your insurance policy to determine what the language in your policy dictates regarding your car’s value. Refer to your collision or comprehensive coverage, depending on which coverage will apply to your accident.
Generally, the value of your car will be calculated by determining the actual cash value (ACV) of the car and subtracting any applicable depreciation. Determining the ACV requires a little research. Your insurance company will likely use industry valuation tools, like the Kelley Blue Book, as a starting point. Factors like the make, model, age, mileage, resale value, and condition of the car will affect the value of your car.
Next, market conditions and your geographic area can also affect the value of your car. Your insurance adjuster might need to look at similar vehicles in your area and determine how much those cars are selling for. Once they have all the information together, they will place a value on your car.
Remember that you can also do your own research and use that to dispute the insurance company’s valuation. You may choose to hire an independent appraiser as well. Sometimes, you might have to negotiate with the insurance company to arrive at a fair valuation and total loss payout. We will discuss how to perform these negotiations in more detail in the next section.
Negotiating With Your Insurance Company On A Totaled Vehicle
You might be wondering what happens if you disagree with the insurance company’s valuation of your vehicle. Luckily, you have some options, but they do require a little bit of work on your part. First, you should always do your own research on your car’s value. Performing your own research lets you understand whether the insurance company has made you a fair offer. Failure to perform this homework could result in you taking a much lower payment than you could have otherwise gotten.
After determining your car’s value on your own, there are some additional steps you should take if you disagree with the insurance company’s value of your car. You should present your insurance adjuster with the information that you have gathered. Put your research together in a clear and concise manner and clearly show the sources where you obtained your information. Make sure you use reputable sources, as those will carry much more weight in your negotiations.
Along with your research, you should present the insurance company with the value you have determined for your car. You can also hire an independent appraiser who will develop their own valuation of your car. Use all of this data and information to present your calculated value back to your insurance agent or adjuster.
If your insurance company refuses to reach an agreement, you can always seek the help of an attorney. This might seem extreme, but it is necessary in some cases. Your attorney can help negotiate the amount of the property damage on your claim, and they can take the insurance company to court if necessary. This will delay the payout on your claim and could delay you getting a new car, but it is sometimes necessary with insurance companies that refuse to pay what you are entitled to.
Will My Car Insurance Company Buy Me A New Car After A Total Loss?
In most cases, the answer is no. Your insurance company will not buy you a new car after a total loss — at least not in most cases. However, there are a few instances when your insurance coverage might include this feature. Your insurance policy must include specific language that includes replacement vehicle coverage. Typically, new car replacement coverage is only valid for a short period of time after the purchase of your car. For instance, your policy might include a new car replacement for a period of 90 days after the purchase of your vehicle. Usually, you will receive the vehicle’s actual cash value instead.
Do not confuse new car replacement coverage with rental car coverage. Many policies will pay for the cost of a rental car for a certain period of time after your accident. This allows you time to settle your claim and purchase a new car with the proceeds of the payout. Again, you should check your policy details for coverage specifics.
What If Your Car Is Totaled But You Are Not At Fault?
So far, we’ve been discussing what happens after a total loss and assumed that the accident was your fault or that no one was at fault, such as in the case of weather-related damage. In that case, you will need to use your own insurance coverage to receive payment for your damages. But what happens if another driver is at fault? In that case, the at-fault driver’s insurance company would be required to pay you reimbursement for the damage to your vehicle.
All 50 states require that you carry property liability insurance coverage on your vehicle, and all states except Florida require liability coverage for personal injuries as well. This means that if you cause an accident, your insurance company will pay for the damage to the other vehicle. So, if you suffer a total loss due to someone else’s actions, their insurance company will pay your total loss claim. Here is how that process typically works.
An insurance adjuster from the at-fault driver’s insurance company should contact you to start a claim. They will usually assess the damage to your vehicle and make you an offer for an insurance payout. In most cases, they will look at the actual cash value of your car — just like your own insurance company would. They will determine the value of your vehicle by using industry research tools according to the make, model, condition, mileage, and other factors.
If you believe they are not offering you the fair market value of your car, you can always dispute their offer. Do your own research and present them with data that shows why their offer should be higher. When working with the other driver’s insurance company, an attorney is often needed. This is especially true when bodily injury occurs due to the accident.
Lastly, even though you don’t plan to use your own insurance coverage, you should still notify them of the situation. They might be able to help you negotiate with the at-fault driver’s insurance to get a better insurance payout. In rare cases, your insurance coverage might also pay you if the other driver does not have enough coverage to cover the entire amount of the loss.
How Car Loans Work On A Totaled Car
Many people use an auto loan to purchase a new vehicle, and these loans can often take years to pay off. So, what happens if your car gets totaled while you still have a loan? The short answer is that you are still responsible for paying the car loan. When you get an insurance payout for the loss, the insurance company will typically make the check payable to both you and your lender. The lender will use part of the proceeds of the payout to pay off the balance of the loan, and you will get the remainder of the money.
Sometimes, you might owe more on your loan than the car is worth. In that case, you will be responsible for paying the difference. For example, imagine that you have a car loan of $10,000 on a car that is only worth $8,000. If that car is totaled, your insurance would only pay $8,000 on the claim. You would be responsible for paying the $2,000 difference between the value of the car and the balance on the loan.
Gap insurance can be a lifesaver if you owe more on your car loan than the car is worth. Gap insurance will cover this difference for you in the event of a total loss. In the example above, your gap insurance would cover the $2,000 difference so that you did not have to pay that amount from your own pocket. Most car dealerships will try to sell you gap insurance when you purchase a car. If you are taking out a loan that is close to the value of the car, then it’s probably a good idea to go ahead and purchase the gap coverage.
What To Do If Your Car Is Totaled
Now you should understand how to know when a car is totaled, how to calculate the value of your totaled car, and how to handle a car loan on a totaled car. So, how do you put that all together and decide what to do if you think your car has been totaled? Plus, what can you do with a totaled car? Here are the steps you need to take.
First, you should take care of any emergencies at the scene and make sure the police are notified. That step should be obvious. You will also want to exchange insurance information with the other driver if another party is involved. Next, go ahead and notify your insurance company of the accident. If you are at fault, go ahead and start a claim with your insurance company so that you can get the process started as soon as possible.
Gather all the paperwork you can about your vehicle, including the loan payoff amount and original sales receipt. Start doing your own research on the value of your car so that you will be prepared to negotiate the total loss settlement with your insurance company if necessary.
You will want to go ahead and get your damaged vehicle to a body shop as soon as possible. Most insurance companies allow you to take the car to any shop you choose as long as they meet your state’s licensing requirements. Since the amount of damages is usually required as part of the total loss formula, you need the body shop to get an estimate on the repairs as soon as possible.
Finally, stay in contact with your insurance adjuster and provide them with any required documentation as soon as possible. The quicker you provide documents back to them, the sooner your claim can be processed and paid. If your vehicle hits the total loss threshold, you can expect the claim to be paid within 3 to 21 days in most cases. Sometimes, it can take up to 30 days to determine whether the claim will be considered a total loss. So, it could take about two months to process a total loss claim from start to finish.
If you accept an insurance payout on your total loss claim, the insurance company will take ownership of the vehicle. They will usually sell it to a salvage yard, and the salvage company may or may not repair the car and apply for a rebuilt title. You might be able to negotiate a deal so that you can buy the car back from the insurance company, and you should inform your insurance adjuster of your plans as early in the process as possible.
How To Use Your Car Insurance Claim To Buy A New Car
Unless your insurance policy includes new car replacement coverage, you will need to find and buy a new car on your own with the proceeds of your insurance payout. So, how do you get a new car after a total loss? The process for doing that is pretty simple once you reach an agreement with your insurance company. Remember that the insurance check will be made payable to you and your lender if you have an outstanding loan on the totaled car. Once the loan is paid off, you will get the remainder of the payout.
You can then start shopping for a new car! Visit dealers in your area to find the car that you want. You can use the money you received from your insurance claim as a down payment on the new vehicle, or you might be able to pay for the total amount of the new car with the money. At that point, the process of buying a new car is no different than buying a new vehicle at any other time. Register the new car with the DMV, and you will be ready to ride again!
The Bottom Line
Most insurance companies use a total loss formula to determine when your car is considered totaled. State laws also can dictate when a car must be considered totaled. Typically, a car will always be considered totaled if the cost of repairs exceeds 75% of the actual cash value of the car. However, some insurance companies and a few states set the threshold lower than this. You might find that your insurance company will total your car if the cost of repairs hits 60% of the vehicle’s value.
Frequently Asked Questions
At what percentage is a vehicle totaled?
So, when do insurance companies total a car? The total loss threshold varies from state to state and between different insurance companies. Usually, the maximum threshold is 75%. This means that if the cost of repairs totals more than 75% of the actual cash value of the vehicle, it will be considered a total loss. However, you might find the threshold to be as low as 60% in some situations. In addition, some formulas use both the salvage value and the cost of repairs in their total loss formula. In those cases, the car will be considered a total loss when the cost of repairs plus the salvage value exceeds the actual cash value of the car.
Is a car considered totaled when airbags deploy?
A car is not always considered totaled just because the airbags deploy. However, repairing blown airbags is usually an expensive fix. For this reason, cars are sometimes totaled when airbags deploy, especially older cars or vehicles with multiple airbags deployed. For example, if both the driver and passenger airbags deploy along with curtain airbags, there is a good chance that the car will be totaled.
Is my car totaled if the frame is bent?
Your car will not be totaled just because the frame is bent. Bent frames can sometimes be repaired, although this can be an expensive repair. The repair cost would be a major consideration when determining whether the car is a total loss. If the repair cost is too high, then the car will be totaled instead of being repaired.
What are the steps for getting a totaled car repaired?
Only licensed repair shops can perform repairs on totaled cars. After the repair, the DMV will perform an inspection on the vehicle to ensure that it is roadworthy. If the car passes the inspection, the repair shop can apply for a salvage or rebuilt title from the DMV. Cars with a salvage title usually sell for as much as 40% lower than similar cars with a clean title. Although you can buy back your totaled car from your insurance company in many cases, you will need a repair shop with the proper license to perform the repairs before you can obtain a registration and drive it again.