What Is Total Loss and How Does It Affect Your Car Insurance?

When the expected cost of repairing a damaged car exceeds the car's actual cash value, the vehicle is considered a "total loss." This sort of claim differs slightly from other minor claims in that it necessitates a little more work on the side of the insured. Here's all you need to know about total loss vehicle insurance claims.

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Claims for total loss and real cash value

To receive an insurance settlement for a totaled car, your policy must include either property damage liability (PD) or comprehensive or collision insurance. Every state has PD, but the only way to get money is to file a claim against the PD of another driver. In order for you to collect compensation from PD, the other driver in the accident had to be irresponsible as well.

The simplest and most certain way to receive recompense for a total loss is through your insurance carrier, which you may do with collision insurance. It makes no difference whether you were at fault in a collision claim; nonetheless, you must pay your deductible before the insurer would cover the claim. Assuming you have this type of coverage in place — and that you are not injured or otherwise occupied with medical care — your first action after the damage happens is to claim with your insurer, just as you would with any other accident. A claims adjuster will check the car to determine the extent of the damage. The total loss determination will be determined here. If the adjuster finds that the cost of repairing the damages to the car is greater than the car is worth to them—that is, the repairs surpass the car's actual cash value or ACV—it is declared a total loss. What constitutes a total loss is not often clear, and how it is assessed differs by jurisdiction. Some jurisdictions have a "total loss threshold" (TLT), which says that damage must surpass a particular percentage of a car's worth to be considered a total loss.

Approximately half of the states use the "total loss formula," which stipulates that a vehicle is considered a total loss if the total of the cost of maintenance plus the residual values of the car exceeds the vehicle's ACV.

For example, if you were to crash a Toyota Camry worth $4,800 in Oklahoma, the automobile would be considered a total loss if it sustained at least $2,880 (60 percent ) of damage. However, if the collision occurred in Colorado, the damage would have to be at least $4,800 to be a classified total loss.

What if your vehicle is considered a total loss?

If you agree that your car is a total loss, auto insurance providers like Geico and Progressive will ask you to perform the following:

• Take off your license plates and other personal belongings.

• Leave the key in the hands of the claims adjuster.

• Please send in any more keys.

• Fill out the necessary documents.

• If you lease your vehicle, contact the leasing company.

The sooner you complete all of these steps, the quicker and smoother the process will be. Following a complete loss designation, the vehicle is normally removed by your insurance carrier, which subsequently tells the DMV that the vehicle has been totaled. Depending on the state, the car will be declared "salvage," and any buyer who specializes in salvaging vehicles will be able to purchase it from the company. Your company may enable you to keep the totaled car if you wish to fix it or keep it for sentimental reasons. You'll get less money if you go that route. Your payout will be the ACV minus the salvage value of the vehicle. Even though it has been totaled, a salvage car has some value in its pieces and the possibility to be restored. Customers should also be aware that certain states prohibit drivers from maintaining total loss automobiles, while others require you to obtain a salvage certificate.

If you disagree that it is a total loss, you can try to bargain with the claims adjuster. For example, you could argue that they did not fully account for any changes you made. You will be needed to produce documents as well as any proof that the car is genuinely worth more than the amount previously established. If you believe you are not being fairly compensated, you may hire a lawyer to fight on your behalf.

How do you be compensated for a total loss?

The amount you'll be awarded for a total loss is determined by ACV, which is the same statistic used to assess if the car is a total loss. The car's ACV is derived by its pre-loss market value, less depreciation since new. Finally, the ACV of your car will be decided by its wear and tear, age, and other variables deemed relevant by your insurer. It is not the same as the price listed on Kelley Blue Book or Edmunds.com. The majority of significant insurers have their technique of calculating ACV. If you agree on a valuation, the insurer will pay you that amount if you own the vehicle. If your vehicle is rented or financed, the compensation is returned to the leasing or financing firm.

If you total a leased or financed vehicle, there is a strong probability you still have a considerable sum to pay. While the insurance company will reimburse you for the automobile's value, it is highly possible that the value has depreciated and no longer reflects the value of the car for which you leased it. If you drive a leased vehicle, you should think about getting gap insurance to cover any remaining balance on the lease.

Frequently Asked Questions

What exactly is a total loss in auto insurance?
A total loss occurs when your car is so seriously damaged in a collision that repairing it would cost more than replacing it. If your automobile is taken, you will be declared a total loss as long as you have comprehensive coverage.

What happens if my automobile is totaled?
A total loss works in the same way that a standard car insurance claim does. A claim adjuster will visit with you to assess the damage and determine how much compensation you should receive. The primary distinction is that, in addition to determining the cost of repairs, the adjuster must also determine the value of your vehicle. This will determine if the car is a total loss and how much money you will receive.

How much money do I get if my automobile is a total loss?
If your car is a total loss, you'll usually be reimbursed the actual cash value (ACV) minus your deductible (if applicable). If you have a new automobile and new car replacement coverage, you will be able to purchase an entirely new version of your vehicle.

Is it possible for me to keep the car if it is a total loss?
In most cases, if your car is a total loss, your car insurer will compel you to turn up your destroyed vehicle to the firm. You may be able to negotiate to keep the vehicle, albeit doing so may diminish the value of your claim.