In a very unfortunate situation, your car gets into an accident and it is no longer an option to repair the car safely or the cost for repairs easily outnumbers the cost of the car. You are left without too many choices, so should you junk or take the total loss claim, which option is the right option?
What happens when your car is a total loss
A vehicle is usually considered totaled when the cost of fixing the vehicle plus its salvage value is more than the real cash value of the vehicle. Appraisers will estimate the cost of maintenance, and decide if the cost of fixing the vehicle will be higher than what the car is currently worth, including items such as new parts prices, salvage value, and labor fees.
Some states have laws that describe, by unique thresholds, a totaled vehicle. For instance, in Alabama, when the damage is more than 75 percent of its worth, a vehicle can be considered totaled. In that scenario, if a car is worth $4,000 and the cost of repair is $3,500, the vehicle will be totaled. While in Colorado if your $ 9,000 vehicle needs $ 9,000 in repairs it would be a total loss.
In some cases, like in Arizona, it is the insurer that determines whether a vehicle is considered a total loss. So, how can the insurer calculate the overall value of a car? Insurers usually use a variety of variables to calculate the real cash value of a car at the time of the accident. Those variables include age, quality, mileage and resale value, in addition to the selling price of comparable cars in your market.
Comprehensive coverage and collision coverage help compensate to replace a totaled car. If you're leasing or financing your vehicle, these two separate coverages are usually required on your car insurance policy. They're optional if your car is paid off. But, you will have to pay out of pocket to purchase a new car if your vehicle is totaled and you do not have comprehensive or collision coverage.
Do I get a new car if my car is totaled?
In some cases there are absolutely no worries, most especially if your car is new. Some prime insurance providers will replace a car if they are considered to be very new, typically less than three months old. So yes, you will be able to get a new car but what happens if you have exceeded the timeframe given for insurers to replace the car at no extra cost.
Even if you have managed to keep your car in pristine condition prior to the accident, the car will not likely receive an excellent rating unless it is a few months old or less. Also even if you owe more than the car's value on your car loan it is unfortunate that an insurer is only required to pay damages up to the fair market value of the destroyed property.
By fair market value meaning when a buyer or seller can agree on a price. Your insurer will give you a check for the actual cash value of the totaled vehicle, minus the deductible on your comprehensive or collision coverage.
For instance, say you owe $13,000 on your car loan, but when it's totaled, the value of your vehicle has depreciated to $10,000. If you have collision coverage then the insurance provider will reimburse you for your car's actual cash value of $10,000. But still you'd have to pay that amount to your creditor, plus the remaining $3,000 out of pocket.
One way to help insure against paying a lender out of pocket for a totaled vehicle is to apply loan or lease difference coverage to your policy. This optional coverage could be available as part of a bundle or as standalone coverage, depending on your insurer.
What happens if you don't agree with a total loss adjuster?
So what happens if you’re not satisfied with the car value they have estimated? Here’s when negotiation comes into play.
You can contest it and try to obtain a better payout if you disagree with the insurance company's calculation of your car's fair market value or replacement cost after a total loss. It is, however, difficult to negotiate with the insurance firm as it is unlikely to budge without substantial evidence.
But if you strongly believe your car has been undervalued, then it's important for you to speak up sooner rather than later. There are actually several occasions where consumers have questioned the pricing set by top insurance providers, and have paid an additional $1,000 or more for their car as a consequence. So do not easily lose hope!
How to negotiate with car insurance adjusters about car total loss
Step one is to ask for a copy of the report that they collected, including all the data that they used to assess the value of your vehicle.
Secondly, do your own research by contacting local dealerships that sell the same make and model like your car. They will most likely give you a higher sales price that will work in your favor.
Keep a detailed record and list any extra options and features your car has. Look into recent sales of your vehicle online, as well as the present sale prices. Not sure where to start looking? Then consider Autotrader.com or Edmunds.com to look for data. Consider using Kelley Blue Book to find out the fair market value of your car.
Keep the data you have gathered from all sources detailed and organized. Have any sales figures recorded in writing, as you’ll be able to use the document to negotiate more money.
Make sure to find out any information related to the extra features that your car had like special car stereos to reverse cameras, as those added options could add a bit more money to your claims.
Once you’ve compiled and organized all of your data, and received the detailed information from the insurance company, you are now prepared to compare your research to that of what the adjuster has found out.
Come up with your own “reasonable” fair market price by looking into where you might be able to squeeze your provider for the extra dollars you rightfully deserve.
Disprove any statements in the adjuster's findings that are inaccurate and damaging to your claim and restate an acceptable figure. Clearly explain why your counteroffer is appropriate, and that includes the reasons behind your demands for general damages.
When you’re making the negotiations for your insurance company to ask for higher value, it is always best to be courteous. But also remember to be firm on your ground. The adjuster will far more likely accommodate and help you out if you come across as sure yet cordial.
By being well prepared with your data and following the suggested strategies, you should be able to negotiate more money if you’re in the right position. So what happens if you're still really unhappy with the final valuation you have received from the insurance company? Then it's time to look into other options.
Should You Junk Your Car Then?
Junk cars are simply vehicles that are so old and damaged that they are more cost-effective when sold in parts than it is to spend money on repair and maintenance. Some common problems that can lead to your car qualifying as junk is that it has severely deteriorated with major parts either missing or mangled. As a result of its issues it can no longer be driven. By junking a car you will be able to get money regardless of its condition.
In some instances you will be able to junk a car that is missing paperwork like when title and/or registration is missing. You will still however be responsible to show proof of ownership of the car before it can be sold or junked. Selling your car for junk requires only a bit of research regarding your neighboring salvage yards.
First of all, you need a reliable salvage dealer that is fair, offers outstanding customer service and is licensed and insured. An internet search to see client feedback of the salvage dealers in your area is the best way to do this. This will give you a clear idea about the buyers of junk cars you might want to use and those you want to exclude.
Next step is securing as much details as possible to make it easy to sell and to ensure that you get the best quote. Important documents and details include car title, mileage, condition of the body and engine as well as signs of damage to the outside or inside.
Most salvage yards will purchase the junk car from you as the pieces of the vehicle still have value depending on the model and condition of the car. So proceed to getting a quote for your junk car. There are several variables for pricing but the major considerations are weight and how complete your car is.
Most salvage yards provide free towing and can work with your schedule. You can even get the option for them to pick up your junk car the same day or the next day. Always remember that a legitimate dealer will pay you the negotiated price when selling your junk car. Be wary of those dealers who at the time of pick-up will try to renegotiate a lower deal.
Lastly, you must inform the DMV that your vehicle has been sold, exchanged or donated. You can conveniently do this by going online, visiting or calling a customer service center by phone.
You must also notify the insurance provider if applicable. Make sure to pass old plates or remove plates from the junk vehicle you are selling.
Again, should you junk or take the total loss claim, which option is the right option?
After knowing the ins and outs of total loss claim and junking cars for parts, you may now easily choose what option to take but wait, is it possible to do both?
In some states you will still be able to drive your car home before it reaches the salvage yard if you have recently been in a car accident and your insurance company has decided that your vehicle is a total loss.
The two main reasons for keeping a totaled vehicle are to salvage it for the scrap parts yourself or because you think it can be fixed and made safe and driveable again. While you may be right there are a few factors to reconsider.
First let’s discuss keeping a totaled vehicle to fix it. If you are a mechanic and can do the repairs yourself for much less than it would cost to pay another mechanic that is one of the only ways a totaled car can be worth keeping. But be warned that a totaled vehicle is a danger to you and other drivers if not properly fixed.
Also take note that a salvage title reduces the resale value of your car by 20% up to 40% or even more. So if you change your mind and don't want to keep the car later, you probably won't find as willing a buyer as your insurance provider would have been.
In some instances, you should be able to come to an agreement with your insurer to bring your totaled car home with a payout. Your insurer would calculate your accident claim payout the same way it would if you did not keep the car, except that the amount of settlement would be decreased by the salvage price of the vehicle.
But not so fast because some state laws may not even let you keep a totaled vehicle. Your agent should be able to tell you the rules in your area.
The best option whether to junk a car or take the total loss claim really depends. The most important thing is to know for yourself the real value of your totaled vehicle. And with the additional information on the ins and out of total loss claims and junking a car, you should be able to make an informed decision of which path to take.