What Happens When a Car Is Totaled?  

What Happens When a Car Is Totaled?  

Who Decides the Car Is Totaled? 

Following an accident, the insurance company will decide if your car is totaled. In the most simple terms, a car is considered to be a total loss when the cost of repairing the damage exceeds the value of the car. While that does sound pretty simple, deciding whether to “total” a car is not a particularly straight forward process. You can’t just look at the blue book value of your car and inform the insurance company that the damage exceeds the car’s estimated value. Typically, before a car is considered to be a “total loss,” the insurance company needs to have a third party determine the vehicle’s actual value and have the adjuster estimate the actual repair cost. If, based on the appraisal and repair estimates, the cost of the repairs exceeds the car’s value, the car will likely be considered to be totaled. In some states, whether or not the car is totaled will be based on a percentage: for example, in one state it may be that when the repairs amount to more than 75% of the car’s fair market value, the vehicle will be considered totaled.  

What If I Still Want the Car? 

There may be laws or policies that could prevent you from keeping the car that has been considered to be a total loss. In some cases, you may be able to keep the car, but you may not be allowed to drive the car on the road. There can also be other problems with keeping the car. For example, if you keep the car, you may have to buy it back. Which could mean that you’d receive the actual cash value of the car with the salvage value of your car subtracted. This means that if the actual cash value of your car was $10,000 and the salvage value of your car was $2,000, you’d receive $8,000. Typically, when you accept a settlement offer, you’re waiving your right to go after the insurance company for any more expenses related to the incident. This means that if you keep your car, and the repair costs are higher than the insurance company estimated, you may not be able to get more compensation to cover the additional expenses. Some states will allow you to “bifurcate” your case into two phases, 1- Property damage; 2- Bodily injury. If your accident happens in a state that allows you to bifurcate or split up your claim into these two phases, accepting a property damage claim doesn’t mean you’ve resolved or released the insurance company from your bodily injury claim; however, some sneaky insurance companies have included language in property damage releases that also resolves the bodily injury claim, which is why it’s always good to have an attorney review the release for you prior to signing it. 

When the Insurance Company Won’t Total the Car 

You cannot decide to declare your car a total loss yourself. Just because you think your car should be considered to be a total loss doesn’t mean that it will be. While it is possible to dispute the insurance company’s decision, it can be difficult to get anywhere with an insurance adjuster without the help of a personal injury attorney. Insurance companies know that the average person isn’t familiar with the nuances of insurance companies, policies, and the laws. Many insurance companies are willing to use this information to their advantage. If you do not agree with the insurance company’s decision to total your car, discussing your options with a personal injury attorney may be an option. It can be difficult to get the insurance company to increase the value they give you for your vehicle, unless you have receipts for recent improvements made to the vehicle. This can include things like new tires; however, regular oil changes and general maintenance will not increase your vehicle’s value. However, if you do not have injuries, and/or the accident was your fault, a personal injury attorney may not be able to help you with the insurance company’s decision. 

What Happens When You’re Upside Down? 

There may be more issues with a totaled vehicle if you owe more on your vehicle than your vehicle is worth. It’s not unusual for a person to be “upside down” on a car loan. This is when the loan on the vehicle is for more than the fair market value of the car. Often, this happens when a new car is purchased and is no longer considered to be brand new. Nothing depreciates faster than a brand-new vehicle. One way to protect yourself against a situation like this is to purchase “gap insurance” through your lien holder or financial institution that you’re paying for your vehicle loan. They will typically offer this when you finance your loan. This policy will protect you when your car value is less than the loan amount and works to pay off the difference. If you don’t have gap insurance, the at-fault party’s insurance will cover the cost of your totaled vehicle, but they will not cover the remaining balance on your loan. Gap insurance may be a good idea for people who have longer term loans, high monthly payments, and new cars. Although different insurance companies have different criteria for which cars can have gap insurance, most insurance companies will allow clients to purchase gap insurance at any time, not just upon the purchase of a new vehicle. If you have concerns about being upside down on your vehicle, you may want to consider gap insurance.