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What Does Car Insurance Total Loss Mean?

What Does Car Insurance Total Loss Mean?

Anyone who experienced a car accident understands what happens when a car gets totaled. In cases where your car was totaled, you can’t repair it without the costs being more than it’s worth. It costs more to repair than the actual value of the car (ACV). Whenever this happens it makes more sense for the insurance company to total the car and give you the money to buy a new car. Just remember that you need either property damage liability or comprehensive or collision insurance on your policy.


When Will an Insurance Company Total the Car?

You see a few cases where the insurance company lists the car as a “total loss.” Not all total losses will be correct, and in some cases, an insurance agent made a mistake. This is where some people will buy salvaged vehicles that were once a total loss. However, this practice comes with risk if you don’t know what you’re doing.

They usually total the car if the damage amount meets the state’s total loss threshold. The total loss threshold speaks about how a damaged car has come close to the actual cash value. For example, if the repairs will cost 75 percent of the total, the insurance agent might choose to total the car. The threshold varies from one state to the next and ranges anywhere from 50 percent to 100 percent. Colorado, for example, is 100 percent, whereas New Jersey is set at 80 percent.

Some states like California don’t use the total loss threshold. Instead, they calculate the total loss with the pre-accident value. This formula uses the repair costs plus the salvage value. It can’t exceed the value of the car.

They will also total the car when the repairs exceed the ACV of the car. Finally, in some cases, you can’t repair the car. Especially if the damage happened to the body of the car, it could make the vehicle unsafe to drive. Damage to the body often costs thousands of dollars to repair. Even if you repair them, these cars have a reputation as unreliable and dangerous.

Google, “auto body shop near me,” and you will see businesses that can help with damage to the body of the vehicle.


What Happens if They Declare Your Car a Total Loss

If an insurance company declares your car a total loss, it means that the cost of repairing the car is more than its current market value. The insurance company will pay you the market value of the car, which is usually the amount you would get if you sold the car in its damaged condition. You will then need to either buy a new car or find a way to repair the car yourself if you want to continue driving it.

First, you must agree to the car as a total loss, but in most cases, car owners don’t have a problem with doing this unless the insurance company hopes to give an unfair settlement. You have a right to reject the amount. Next, you will follow a series of steps to accept the car as a total loss. The faster you do this process, the smoother it will become.

First, remove your license plates and personal valuables from the vehicle. Next, you will take in the key and leave it with the claims adjuster. You need to send in spare keys with them as well. After you do this, the insurance agent will hand you some paperwork to fill out.

Those who lease their cars will need to contact their leasing company. The insurance company will reimburse the leasing company for the ACV of the car. This subtracts the possible deductibles. Anyone who didn’t lease their car will receive a check for the ACV of the car allowing them to buy a new car. In most cases, the insurance company will take control of the vehicle after they declare it as a total loss.


What if the Insurance Settlement is Unfair?

We encourage you to scrutinize your insurance company before you agree to an insurance settlement. In many cases, insurance companies will attempt to settle for the least amount of money possible. You have a right to negotiate or dispute the amount that they wish to give you. Until you accept an offer, you can’t move forward in the process, however.

When you dispute an insurance settlement, you might point out how the insurance adjuster didn’t account for modifications to the car, which makes the value go up.

Note: You must show evidence and documentation that you performed this work. That will prove the car is more valuable than the original offer. In some cases, the insurance company refuses to play fair. For those situations, you can take the case to a lawyer to fight for better compensation. If you have documentation and proof, you have a right to fight an unfair settlement.


How Do They Pay for a Total Loss?

The insurance company will reimburse you for the ACV, which uses the same metric when determining whether a car is a total loss. This metric accounts for the wear and tear and age of the vehicle. Multiple factors will influence how much they pay you. For those who drive leased vehicles, we recommend that they take out a gap insurance policy. This will cover them in the event that the car gets totaled. Otherwise, they could total the car, and they’d still be on the hook for monthly payments.


At Elmer’s Auto Body, we have seen this process play out over and over for over 70 years. We serve the community in South Jersey and have operated as a family-owned business for all of that time. We wish to make your life easier, more convenient, and faster. If you’d like to learn more, please call us at (856) 218-0202.

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