If your car has been in a car accident, your insurance provider may determine that your car is a total loss. Usually, insurance companies handle claims by calling cars whose damage/repair costs will cost 70% or more of the value of the car.
Car insurance companies would typically consider older cars as not worth repairing, thus are considered junk. However, if you think that your totaled car is valuable enough to be repaired, you can make an appeal to your insurance company’s decision to consider it a total loss. This would require you to provide substantial evidence to prove your car’s worth.
If the damage to the junk car is mostly cosmetic, you may be able to bring it back to good condition at a moderate cost. But, if repairing the car means spending more, it might be best to just let it go.
Car insurance companies are cautious about fixing badly damaged cars because all the damages may not be visible. Oftentimes, more damage is discovered once you start dismantling. Therefore, if the professionals working for your car insurance company think that your vehicle is beyond repair for a reasonable cost, they probably are right.
What is a total loss?
A vehicle is considered a total loss when the cost or repairs would be worth more than the actual value of the car. Making this type of claim is slightly different from making other minor claims, as it requires more effort on your part as the insured.
A car is NOT a total loss if the repair cost is less than its market value. Your car insurance contract should have the phrase stating, “We indemnify you up to the market value of your vehicle.” This means you completely have the right to insist on having your vehicle repaired up to its market value. Should your insurance fail to do this, then they are breaching the contract. That is why it is very important to make yourself familiar with your terms and conditions with your insurer.
When can your car be considered a total loss?
Your insurance company can determine that your car is a junk or a total loss for the following reasons:
- Your car has suffered structural damage and the repair costs more than the market value.
- Your car cannot be repaired safely.
- Your vehicle has suffered flood damage and was immersed in contaminated water, and it is beyond repair.
- Your car was completely burned out (i.e set on fire or caught fire), and it has no retrievable components.
- There is a varying total loss threshold for different states. Many states use a Total Loss Formula to calculate the cost of repairs plus the scrap value of the car.
If you are doubtful whether your vehicle can be restored to its safe driving condition, you should absolutely cut your losses and just accept the cash your insurance company gives you. After all, your safety is the most important thing you should consider in keeping your car.
In most cases, once your insurance provider decides to write off your vehicle as junk, its title is branded as a salvage. They will determine the actual cash value of your car, then will auction off the car for its salvage value.
What happens when your insurance company declares your car as a total loss?
If you agree with your insurance company’s decision to consider your car as a total loss, they will require you to remove your license plates and other personal items, fill out all the necessary paperwork, send in any extra keys, and leave the keys with the claims adjuster.
The quicker you comply with all these things, the faster the claims process will be. Your car will then be taken by your insurance company, who then notifies the appropriate authorities that your vehicle has been totaled. Depending on the state, your junk car may be declared a salvage. In this case, buyers who specialize in salvaging cars can buy the car from the insurance company.
If you disagree with the insurer’s decision to declare your car a total loss, you may negotiate with your claims adjuster. You may be required to submit more documents to prove that your car is actually more than what it was previously determined. If they failed to take into account all the modifications you made, you could point this out. In the event when you feel that you are not adequately compensated, you may consult a lawyer to fight on your behalf.
What should I expect when making an insurance claim?
While the experiences in making insurance claims vary depending on the accident, these are the most common things to expect in the claims process.
You will have to provide details about the accident. Your car insurance company will most likely want the names of the people involved in the accident. The company would also ask for other vehicles involved, photographs of the damage, and accident reports.
Get an estimate of the repairs. Your insurer will assign an adjuster to estimate the loss. The adjuster will assess who was at fault and provide an estimate for repairs. It would be best if you get two or more repair quotes.
Your insurer will pay you your car's actual value. If your car is totaled, your insurer will pay you the actual cash value of the vehicle (depreciated value). The thresholds of the percentage of the car’s value versus the repair costs vary in every state.
How does the claim adjuster decide how much my car is worth? – How Insurance Companies Handle Claims
Your insurance company’s adjuster will take into consideration your vehicle’s mileage, condition of the exterior, interior, tires, and any other add-on parts you have equipped your car. The adjuster will base his decision on the condition of your car before the accident. He will then find similar models that are for sale in your local area. The total loss estimate will be based on this comparison. This is known as the Actual Cash Value of your vehicle.
Most big insurers have their own method of determining the Actual Cash Value of a vehicle. Once you agree to that amount, the company will pay you that amount. If your car is leased or financed, the compensation is given to the leasing or financing company.
Furthermore , you can collect the cost of sales tax, title, and registration in these 34 states: Georgia, Alabama, Alaska, Hawaii, Arizona, Arkansas, California, Colorado, Florida, Illinois, Indiana, Kansas, Vermont, Kentucky, Minnesota, Mississippi, Nebraska, Nevada, New Jersey, Maryland, New York, Ohio, Oregon, Pennsylvania, Puerto Rico, Maine, Oklahoma, Tennessee, Utah, Virginia, Washington, Connecticut, West Virginia and Wisconsin.
If you feel that your car is worth more than what your adjuster quoted, you should say why. Try to find a car for sale that is a better match for your vehicle. Inquire on how to recoup the costs of sales tax, title, and registration of the replacement vehicle.
Do I still have to pay a loan on a totaled car?
If your totaled car was under financing, your insurer will most likely make the check payable to you and the financing company. This means that you will have to agree with your lender on how to release that money. Usually, the lender will be reimbursed first. Any remaining money will be paid to you. If you still owe some amount to your lender even after the car insurance payment was received, you are deemed responsible in settling the remaining balance.
If you have a collision cover, your insurance company will reimburse you for the actual value of your vehicle. Adding a gap coverage on top of your car insurance policy is one way to protect you from the depreciating value of your car and paying a lender out of your own pocket for a junked car.
Tips to Get Your Insurance Money Fast When Your Car is Junked – How Insurance Companies Handle Claims
A total loss vehicular accident is usually more complicated than getting a car repaired. There are more steps involved in making a claim with your insurance company. To help you expedite the process, here are some helpful things to keep in mind.
- Report the claim to the insurance company as soon as you can. A total loss claim is not something that you want to leave for later, as it can sometimes take more than a month to settle. The sooner you file the claim, the sooner the insurance company can start processing it.
- Locate your title. This is a very important document that you should provide your insurance company in the event of making a claim. Make sure to have this at hand as you might have to sign over the title of your vehicle to the insurance company if it was determined as a total loss.
- Check how much you owe. If you are on a car loan, check the amount you owe your lender. Knowing how much you owe can help you prepare in cases when your loan amount is bigger than the current value of your car. Insurance claims are not paid based on the loan you owe, but on how much your car is actually worth.
- Research on the value of your car. Do a personal research to find out the real value of your car. Do not rely on the final figure that your insurance company will give you. Check similar cars for sale in your area and compare their price to the value of your car.
- Submit all the required documents promptly. Total loss claims can require a huge amount of paperwork. Remember to sign your name exactly as how it appears in the vehicle title.
Can I choose to keep my totaled Car? – How Insurance Companies Handle Claims
Maybe you do not agree with your insurance company’s decision to junk your car, or maybe you want to salvage the car parts yourself. Perhaps you think that your good old car can still be repaired. If for some reasons you want to keep your totaled car, you can do so but there will be some limitations.
When you purchase a car insurance policy, you sign a contract that states that you can't make your pay out more than your car is worth. However, most states require insurance companies to adhere to the “made whole” doctrine. This means that you should be restored to the same financial position that you were in prior to the accident.
In some instances, your insurance company will work with you if you choose to retain salvage in accordance with their terms and conditions and the state law. Your insurer will still have to pay you the vehicle’s actual value, minus the deductible and what the company would have earned for it at the salvage yard. If you want to keep the car, you should let the claims adjuster and insurance company know straight away.
Think carefully before you make this decision, though, because it might cost you a lot to repair a totaled vehicle. If not properly repaired, a totaled car may be a risk to your safety and to other road users as well. You might also encounter issues in terms of passing inspections, and finding an insurer who would be willing to insure your repaired car. Most importantly, check your state rules, as your state may not even allow you to keep a totaled car.
Making a claim from your car insurance company after your car is junked can be taxing. There are several steps to follow, and the sooner you start the process, the smoother it will go. Knowing the ins and outs of how insurance companies handle claims for totaled vehicles gives you the advantage of making sure you are well compensated and that this compensation is delivered in a timely manner.