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Car Insurance: What Does “Total Loss” Mean

Car Insurance: What Does "Total Loss" Mean

After you have been in an accident, you will need to have an estimate completed. Once the insurance company receives it, they can repair your vehicle or declare it a total loss. In that case, the insurer will reimburse you for a certain portion of the car without making any repairs. Unfortunately, that could leave you without a vehicle. Here are a few things to know about how a total loss could affect you.


What Is a Total Loss?

When your vehicle has been severely damaged in an accident, it could cost more to repair it than the vehicle’s actual value. The insurance company would deem the car a total loss in that situation. If you have comprehensive coverage, and the car was stolen, that vehicle will also be considered a total loss.

A total loss is similar to a regular insurance claim. The claim adjuster will review the damage and determine the amount you should be paid for the vehicle. Instead of deciding on the amount of repair costs to cover, the adjuster will put a specific value on your car. As previously stated, if the repair costs exceed the vehicle’s total value, insurance companies will consider it a total loss.


How Insurance Companies Determine a Total Loss

You need comprehensive, collision, or property damage liability insurance to receive a payout for the vehicle. In many cases, the claims will be handled through the vehicle owner’s own insurance. Unfortunately, it does not matter which driver was at fault for the accident. You will need to pay the deductible to receive compensation for the damages.

When the claim adjuster has determined that the repair costs exceed the actual cash value of the car, it will be considered a total loss.

Determining what is a total loss is not always straightforward and can change from state to state. Some states use a total loss formula that combines the actual cash value and the car’s salvage value. If the repairs exceed that, then the vehicle is a total loss. However, some states will use a total loss threshold where the damage will only have to exceed a certain percentage to be considered a total loss.


What Happens If a Car Is Declared a Total Loss?

Sometimes, you may disagree with the decision to total the vehicle. You will need to provide documentation and a few estimates to overturn the decision. Owners will have to submit paperwork that the vehicle is worth more than the claim adjuster’s estimate or that the damage is less costly than initially thought.

Most insurance companies will stand by their conclusion, but some car owners may have to use a lawyer to overturn the decision. However, if you agree with the total loss outcome, you will need to turn over the vehicle and the keys to the claims adjuster. After that, the insurance company takes possession of the car. The insurer will notify your department of motor vehicles, and a salvage title could be issued.

Sometimes, you may want to keep the vehicle. Remember that not all insurance companies will allow it, or you could receive less compensation for the vehicle. A few salvage cars may have valuable parts, or the owner wants to keep it for sentimental reasons. Unfortunately, some states will not allow a driver to keep a total loss vehicle. In those situations, you must return the vehicle to the insurance company.

With a totaled vehicle, finding an auto body shop that can fix and restore the car to its pre-accident condition is crucial. Keep in mind that not all totaled vehicles can or should be repaired. Safety should be your first concern. If any vital safety components have been damaged and cannot be repaired, you should consider allowing the insurance company to total the vehicle.


How Are Owners Paid for a Total Loss?

The same metric to determine the total loss will be used for your compensation amount. An actual cash value of the vehicle takes the pre-loss market value minus any depreciation. Age, wear and tear, and other factors may be used to find the car’s cash value. Many insurance companies use their own methods to determine the actual cash value, meaning it could differ from a value found on a website or through Kelley Blue Book.

After you have agreed to the amount, the insurance company will pay you. If the car was financed or leased, then the payout will go to those lending companies.

Many vehicle owners have a large amount of money left on their vehicles. With depreciation and other factors, you could be stuck with a large payment for the totaled vehicle. If you have a leased or financed vehicle, you should have gap insurance, which covers you for any remaining balance on the car.


Total Loss and Your Vehicle

You have limited options when an insurance company declares a total loss for your vehicle. You could keep the car, but it can mean a reduced payout from the insurer. Many times, you could challenge the total loss decision, but you need the proper documentation for your claim. Remember that some cars are severely damaged and cannot be repaired. With that, you may have to walk away and accept compensation from the insurer.


Need an Auto Body Shop Near Me?

If you need an estimate for your vehicle or want a repair completed, reach out to Elmer’s Auto Body. We have experience handling all types of vehicle repairs, from minor fender benders to major collision damage. Schedule an appointment by calling (856) 218-0202.

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