What to Do if Your Vehicle is a Total Loss

You Totaled Your Car? What Should You Do?

You didn’t set out to crash your car, but it happened and now you’re at the mercy of the claims process. Not just any claim, but a total loss insurance claim. Aargh!

I’ve been there and fully understand, this isn’t fun, but a good insurance company will treat you fairly and keep you informed of the process.

The first step in the claims process … assuming no one was injured … will be a damage appraisal.

What is the damage appraisal?

When a vehicle is involved in an accident claims adjusters will dispatch experts to inspect your vehicle to determine the cost of repairs. This is a routine process where a field appraiser will come to the insured vehicle (frequently at a body shop) and conduct an estimate of the repairs. The estimate will include both parts and labor.

Field adjusters or appraisers are experts, and they can determine the cost to repair a vehicle, even if the property is a mangled mess. But when the vehicle is a mangled mess, the likelihood that the cost of repairs will exceed the value of the vehicle is much greater, and when this occurs, the vehicle is determined to be a total loss.

When is a car considered a total loss?

There is no single formula to determine if a vehicle is a total loss. The insurance company will evaluate the vehicle and make a judgement based on the total estimated costs of repair, at the time of the accident.

In many cases insurance companies set percent-of-value thresholds to guide them in determining if a vehicle is a total loss. For instance, if the insurance company uses 75% of value as a guide for total loss evaluations, and your vehicle is worth $15,000, then a cost of repair estimate of $11,250 or higher could make your vehicle a total loss.

Now you’re wondering, how do they determine the value of my car?

There are a number of factors insurance companies will consider when determining the value of your vehicle at the time of the accident. You’re vehicle’s worth, in insurance parlance is called the “actual cash value.”

In determining the actual cash value of your car, the appraiser will utilize factors like the age of the car, its condition, mileage, resale value, and the selling price of similar vehicles in your area.

What if you still have a loan or lease, or there are other interests on your car?

When you vehicle is determined to be a total loss, and it’s time for the insurance company to settle, the total amount of settlement will likely be the actual cash value (minus your deductible – depending on your policy). However, if you have a lienholder or lessor, the insurance company will most likely make the check payable to both you and the other interested parties (eg. Lienholders).

When a vehicle is financed or has other interests, it is very common for the insurance company to pay the lienholders or financial institutes first. If there is a balance remaining on your loan or lease, in this case you will likely be responsible for the balance.

Buying gap coverage

When a vehicle is totaled, and there is a loan or lease, it is very common for the balance of the loan to exceed the actual cash value of your vehicle. This is more common on leased vehicle, but still a real concerned for financed vehicle too. If you are concerned about this, you can purchase loan/lease gap coverage. This form of coverage is designed to pay the difference in the actual cash value and the outstanding loan or lease value.

Removing the totaled vehicle from your policy

Your insurance company will not automatically removed your totaled vehicle from your policy. As the policyholder you will be responsible to make this change to your policy. Typically, this is accomplished by simply calling your agent to remove the totaled vehicle. Before you make this change, however, you need to have a review of all the coverage implication with your agent as you may be benefiting from coverage on a temporary replacement or rental that may end when your current vehicle is removed.

Conclusion

The claims process is not fun, and having your vehicle can create unexpected consequences between you and your financial institutions, and in having to find a replacement vehicle. Make sure you ask your insurance agent or company all the right questions, and you have the right coverage for your unique needs.