Auto accidents happen every day. Someone is late to pick up their child from school, runs a stop sign, and crashes into your vehicle. An unexpected storm sweeps through your local area, uprooting a massive tree in front of your yard, landing on top of your vehicle. Just like that, your car is totaled.
If you have car insurance, you will most probably expect the insurance company to cover the damage to your car. In most cases, they will cover the damage if the repair costs are less than what your vehicle is worth.
But if the cost of repair exceeds what your car is worth, your insurance company will most likely declare your vehicle a total loss and reimburse you for the actual cash value of the car.
So, what happens when your car is totaled, and how are you supposed to handle the situation?
What Does Totaling Your Car Mean?
Generally, auto insurance companies total a car when the overall repair cost is more than the actual cash value (ACV) of the vehicle. The ACV is what your vehicle is worth on the open market minus depreciation. The insurance company will thoroughly evaluate your car to determine its ACV.
The insurer will also factor in your car’s salvage value, which is the amount they could get if they sold your car for parts. The salvage value is deducted from the ACV to arrive at the final payout amount.
For example, let’s say your car is worth $10,000, and the cost of repairs is $8,000. The salvage value of your vehicle is $1,000. Therefore, the insurance company will reimburse you $9,000 for the total loss ($10,000 ACV minus $1,000 salvage value).
In some cases, the insurance company may decide that it’s cheaper to repair your car than declare it a total loss. In such cases, they will go ahead and fix it.
What Happens to Your Car After It’s Totaled?
Once your car is totaled, the insurance company will possess it. They will either sell it to a salvage yard or auction it off. In some cases, they may keep the car for their own use. The salvage value of your vehicle will be deducted from your payout amount.
If you still owe money on your car loan, the insurance company will pay the lender first and give you the remaining amount. Otherwise, you will get the full payout amount if you have paid off your car loan.
In some states, you may have the option to buy back your totaled car from the insurance company. This is usually not a good idea as the cost of repairing a totaled car is usually more than what the car is worth.
My Car Got Totaled – What Do I Do Next?
If your car is totaled in an accident, the first thing you should do is call your insurance company and file a claim. The insurance adjuster will inspect your vehicle and determine if it is indeed a total loss.
If your car is totaled, the insurance company will reimburse you for the actual cash value of the vehicle minus the salvage value and any deductibles. You will also have to pay off your car loan if you still owe money on it.
Once you have received the payout from the insurance company, you can use it to buy a new car. If you still owe money on your car loan, the insurance company will pay the lender first and give you the remaining amount.
Value Issues in Total Loss Claims
The actual cash value of your vehicle is generally determined by the insurance company. They will look at factors such as the make, model, year of manufacture, its mileage, and its condition before the accident.
The problem is that insurance companies often lowball the ACV of totaled cars. They may try to give you an ACV that is much lower than what your vehicle is actually worth. This leaves you with two options:
- You can accept the insurance company’s offer and get a new car.
- You can negotiate with the insurance company to get a higher payout.
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If you decide to negotiate with the insurance company, you will need some evidence to back up your claim. You can get a written estimate from a reputable repair shop or dealership. You can also look up the ACV of similar cars in your area.
Once you have evidence to support your claim, you can negotiate with the insurance company to get a higher payout. If they still refuse to budge, file a complaint with your state’s insurance commissioner.
What Insurance Covers a Totaled Car?
The type of auto insurance that kicks in when your car is declared a total loss mostly depends on the circumstances of the loss. There are four types of auto insurance policies that may cover a total loss. They include:
- Collision coverage: Collision coverage will only cover a total loss if you are involved in an accident with another car or immobile objects such as a lamppost or fence.
- Comprehensive insurance: Comprehensive insurance will cover a total loss due to events such as fire, theft, or vandalism. It will also cover damage caused by animals, floods, and hail.
- Gap insurance: Gap insurance covers the difference between what you owe on your car loan and the actual cash value of your car if it is totaled. This type of coverage is only required if you have a loan on your vehicle.
- Property damage liability: If you are involved in a crash, and the other party is at fault, their property damage coverage should pay for any damage to your car if they are insured.
If you have an auto loan or lease on the car, the lender will most probably require you to have comprehensive and collision coverage. Otherwise, these policies are optional in every state.
You could skip them as long as you have the minimum state-required liability coverage. However, that would be a risky move as you would have to pay for any damage to your car out of your own pocket if it is totaled.
How Does a Totaled Car Affect Your Finances?
A totaled car can have a significant financial impact, especially if you still owe money on the vehicle. Here are some of the ways a total loss can affect your finances:
- You will have to pay off your car loan if you still owe money on it.
- You will need to find a way to pay for a new car.
- Your insurance rates may go up.
- You may have difficulty getting auto insurance in the future.
A totaled car can be a financial setback, but it doesn’t have to be the end of the world. With a little bit of planning, you can get through it and come out on the other side.
Can I Keep My Totaled Car?
You might be able to keep your totaled car, but it mostly depends on your state’s laws. Typically, the best way to start this conversation is by talking to your insurance company to allow you to purchase the salvage title of your car from them.
You will have to pay for this out-of-pocket, but it may be worth it if you’re emotionally attached to your vehicle or if the repairs would be cheaper than what you would get from your insurance company.
If you are allowed to keep the vehicle, you cannot drive it right away. This is because once a car has been declared a total loss, it has to be repaired and re-inspected. If it passes re-inspection, you will be given the salvaged or rebuilt title for the car.
You must provide the title and proof of inspection to the DMV to register the car so you can drive it on the road without any issues.
Unfortunately, you may be limited in the types of insurance coverage you can get for a salvaged car. This is because they are considered high risk. You may only be able to get liability insurance that would not cover any damage to your vehicle in an accident.
It’s essential to keep in mind that if you choose to keep and repair your totaled car, it may never be worth as much as it was before it was totaled.
This is something you will need to weigh out before making a decision. If you’re not sure what to do, you can always talk to a professional who can give you more information and help you make the best decision for your situation.
Has Your Car Been Totaled? An Attorney Can Help!
You will be left with more questions than answers after a serious accident. Other than your injuries, you have to deal with the insurance company, the other driver, and the legalities of it all. Things can become even worse if your car is totaled.
You don’t have to deal with this alone, and that is where an experienced car accident attorney can help. They will work on your behalf to get you the compensation you deserve so you can focus on what’s important – your recovery.
Get in touch with an attorney today for a free, no-risk consultation to see how they can help you.