How to Determine Total Loss of a Vehicle

If you have been in a serious car accident in which there has been a “total loss of a vehicle,” you probably have a lot of questions as to how an insurance company determines this status. Let’s start with defining the term.

What Does It Mean When An Insurance Company Rules a Car a Total Loss?

According to The Balance.com, a total loss of vehicle designation indicates that the insurance company considers the damaged car not worth repairing when a cost to benefit analysis is applied.

This analysis is typically done using proprietary software that consumers cannot access. Understanding the process, however, helps consumers negotiate more effectively on their own behalf.

Now that expense needs to be weighed against the current market value of the vehicle—what it would sell for just prior to the accident.

Put simply, if it costs more to fix that it is worth to sell, insurance companies might apply the total loss of vehicle designation. This is accompanied with a pay out of the pre-accident value to the coverage holder.

What Is Total Loss Vehicle Valuation?

Total loss vehicle valuation is the process of determining whether not a vehicle is worth repairing or just totaling. Some insurance companies will try to find a vehicle for sale that’s similar to your wrecked vehicle and deduct certain amounts for varying mileage, age and condition of your potential total loss vehicle.

While each insurance company generally uses its own software to further determine the actual cash value, Carfax entered the world of total loss vehicle valuation last year when it released a new program through its website CarfaxForClaims.com.

Carfax says its software adds a unique perspective to the total loss vehicle valuation process because the vehicle’s VIN-specific history is included in the database, which the company says reduces subjectivity and provides better accuracy for all parties involved.

The state where you reside can affect whether your vehicle is totaled or not. Many states use a total loss formula that provides guidance, while others say a vehicle’s damage must be equal to a certain percentage of the car’s value in order to be called a total loss.

How Is the Market Value of a Vehicle Determined?

As previously indicated, specialized software is typically used. Consumers can access tools such as the Kelley Blue Book (KBB)  to help have an idea of their vehicle’s approximate value, however.

According to Kelley Blue Book a 2005 Ford Focus Four-door hatchback with 85,000 miles—an actual vehicle designated a total loss in the summer of 2018—was valued for private sale purposes at $2,922.

Given the age of this car, you wouldn’t expect value to be this high. What KBB took into account, however, was the low mileage to age factor, reasonably good condition of engine and exterior cosmetic, and leather interior.

So How Does Knowing the KBB Value Help Me Negotiate with an Insurance Company?

First, you might be surprised to discover that the Ford Focus above was totaled and paid out at $5,500. Knowing the basic value through KBB, the owner was able to tell the insurance company about recent repairs and investments that increased the final payout amount.

Depending upon the methods used by your insurance carrier who identifies the actual cash value and how much you’ve invested in your vehicle, you may be able to negotiate for more money, too.

Do I Get to Keep My Vehicle?

In general, if your vehicle is declared a total loss by the insurance company, you typically do not get to keep it. However, according to carinsurancecomparison.com, you might have the opportunity to negotiate with the insurance company to purchase back your salvaged vehicle because in most cases, the actual cash value you receive will include the price of the salvaged vehicle, meaning that the insurance company gets the rights to keep the totaled vehicle.

In many states, the amount you receive for the insurance company totaling a vehicle should include the price paid for tags, registration fees, and taxes for the year or prorated over the course of the year.

What Is GAP Insurance and How Does It Help in a Total Loss of Vehicle Designation?

Automobiles are perhaps the worst investment we can make in terms of holding their value. According to Insurance Information Institute, a vehicle starts to depreciate as you drive it off of a lot.

Most lose 20% of their value within one year of purchase. GAP insurance is designed to protect the consumer in the event that they own more on their car loan than the vehicle is worth at the time of the loss.

Since insurance companies tend to pay out total losses at market value rates with minor adjustments, GAP insurance protection is a vital tool in your pocket.

Join a Free Total Loss Car Accident Class Action Lawsuit Investigation

If you were insured under an auto insurance policy, experienced a total loss car accident, and were not reimbursed for sales tax and other fees by your insurance company in the last 5 years, you may qualify to join a total loss car accident class action lawsuit investigation.

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