Christina Spicer  |  March 15, 2021

Category: Insurance

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Red total loss vehicle may not be fully covered by insurance company

Drivers who have been in a serious auto accident may wonder how their insurance company determines whether a vehicle is a total loss.

Even the best drivers can find themselves in a bad accident when other drivers don’t obey the rules of the road. It’s helpful for consumers to understand how their auto insurance company decides what to do with their vehicle.

What Is a Total Loss Vehicle?

A total loss accident can be any type of accident that resulted in the vehicle being totaled, whether it’s the vehicle striking a deer or a major collision with multiple other drivers.

Typically, the insurance company views a total loss accident as a situation in which the resulting vehicle repairs are complex and would cost more to fix than the car is actually worth.

However, a total loss can occur in other situations, as well.

A car may be declared a total loss if the damage to a vehicle simply cannot be repaired safely — regardless of how much any repairs would cost.

Other situations may result in a total loss depending on state laws.

If vehicle repairs exceed a “total loss threshold,” the vehicle may automatically be declared a total loss.

Why Would a Car Be Considered a Total Loss Vehicle?

Although individual insurance company policies might vary, the typical process for determining whether a car is a total loss begins with a claim from the car owner.

The insurance company then schedules a damage inspection; the vehicle owner may be provided a rental vehicle because the car is likely undrivable.

Several business days later, the insurance company might inform the owner the vehicle is a total loss and present a settlement offer.

If the owner accepts this settlement offer, they would need to find the vehicle title, remove their belongings from the vehicle, then sign the paperwork, and receive payment, according to GEICO.

A car or truck is generally considered a total loss when the insurance company decides the expensive of fixing the vehicle would be more than the vehicle’s actual value — colloquially referred to as the vehicle being “totaled.”

A third party known as an insurance adjuster is responsible for investigating the damage to the vehicle, determining necessary reimbursement, and deciding whether the vehicle will be considered a total loss.

However, many people are unfamiliar with the total loss process and cannot be sure whether the insurance company is taking advantage of their lack of knowledge.

The method of reaching this determination can vary from state to state, according to The Balance.

Some use the total loss threshold (TLT) approach, which means the damage has to exceed a percentage of the vehicle’s value in order to be considered totaled, according to Value Penguin.

Total loss formula is another common method. With total loss formula, a vehicle is considered totaled if the cost of repair plus the vehicle’s salvage value exceeds the actual cash value (ACV).

Some policies will use agreed value (generally used for classic cars), or stated value, instead of actual cash value. Sometimes, consumers carry additional insurance coverage such as guaranteed auto protection (GAP) insurance or new car replacement.

Both of these types of insurance can help protect consumers from shortfalls and limit the amount they owe.

How Much Money Will Drivers Receive If Their Car Is Totaled?

How much money a vehicle owner receives depends on a variety of factors.

Policyholders should receive the vehicle’s actual cash value. In some cases, auto insurance policies are unclear as to whether the actual cash value includes sales tax, title transfer fees, tag transfer fees, and other similar fees.

It’s important to understand how a car’s total loss value is calculated. This will help consumers recognize if they’re being underpaid so they can negotiate a better payout on their claim. Understanding total loss calculation can also help provide an explanation for why the policyholder may be getting less money than they need to pay off their loan.

A vehicle collision - total loss vehicleRecently, some insurance companies have faced allegations of not compensating policyholders while taking these fees into account. By neglecting to include all of the fees as part of a vehicle’s actual cash value, consumers allege, the insurance companies are robbing them of hundreds, if not thousands, of dollars.

Indeed, certain state laws require that insurance companies include fees and taxes when determining the actual cash value of a total loss vehicle, but some companies may be failing to reimburse consumers for these costs.

Total loss payments must include the costs of sales tax, title, and registration if the insurance policy was issued in one of 33 states or Puerto Rico, according to Insurance.com. These states are Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Kansas, Kentucky, Maine, Maryland, Minnesota, Mississippi, Nebraska, Nevada, New Jersey, New  York, Ohio, Oklahoma, Oregon, Pennsylvania, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia and Wisconsin.

Failure to pay these fees may be unlawful in the states listed above.

However, even if a policy wasn’t issued in one of these states, insurers may be required to pay these fees based on the terms of their policy agreements.

A qualified legal professional can help examine these terms to see if an insurer should have paid the costs of fees as part of a total loss settlement.

What If It’s a High-Mileage Vehicle?

Mileage matters.

When the insurance company deciding whether to total a vehicle, the company considers mileage, make, model, year, and the overall condition, including physical wear and tear before the accident as well as damage caused in the crash.

New tires, a new transmission, and other big-ticket items that have recently been fixed or added to an older vehicle could translate into more money in the policyholder’s pocket if the vehicle is totaled.

A new car that’s deemed a total loss vehicle will result in more money to the insured. But at the same time, the insured may owe more money than received. Even if a vehicle is fairly new, cars depreciate fairly quickly.

Can a Total Loss Vehicle Be Insured?

Some people want to keep their vehilce even if it’s been totaled — regardless of whether it is drivable.

In these cases, if state law allows, drivers may be able to get a salvage title for their vehicle. This means a driver can’t get plates for their vehicle unless they complete repairs and apply for a non-salvage title with the state.

After a vehicle is totaled, it may in some cases still be drivable, but insuring a total loss vehicle may prove to be difficult.

Indeed, after a total loss accident, it may be difficult to find an insurance company open to insuring a total loss vehicle; none will insure it before it has been adequately repaired.

Insurance companies often are unwilling or at least reluctant to offer full insurance on a vehicle that has been totaled, according to The Balance. An insurer may only be willing to offer liability coverage rather than fully insuring a total loss vehicle.

Will Drivers Receive Kelley Blue Book Value for Their Total Loss Vehicle?

While a policyholder can look at values in Kelley Blue Book, Edmunds, and other automotive websites, The Balance says, consumers can’t really count on receiving the amount of money shown in those publications.

Every insurance company has its own proprietary software. When a vehicle is in a serious accident, all the details about that vehicle are run through the software. The offer and then the amount the policyholder receives as the actual cash value is unique to that insurer, vehicle, and insured party.

Determining the estimated actual cash value of a vehicle can help policyholders figure out if the deal they’re being offered is good, though the calculations they make will only be a ballpark estimate.

Consumers can use online tools for to make this estimation, but also should consider checking out local classified ads for similar vehicles of similar quality for a base estimate.

Does It Matter Where the Policyholder Lives?

Where a person live matters because some states have laws that determine a total loss threshold, according to Carinsurance.com.

In Florida, for example, if the damage exceeds 80 percent of the car’s value, it is considered a total loss. In Nevada, the total loss threshold is 65 percent of the vehicle’s value.

Nearly half of U.S. states use a total loss formula that dictates a vehicle is a total loss if the cost of repairs plus the vehicle’s salvage value equals more than the vehicle’s actual cash value.

What Owners Need to Know About a Total Loss Claim

A total loss claim can take more than a month to finalize and close, so the owner is better off making the claim as soon as possible.

The policies and procedures of the insurance company play a significant role in the speed of the claim. However, the sooner the claim is filed, the sooner the company can begin working on it.

If the vehicle has not yet been paid off, it’s also important for the owner to know how much is owed on the vehicle.

If the owner has loan, lease, payoff, or GAP insurance on their car insurance policy, this can help cover the balance of the loan.

Total loss claims are not based on how much is owed but rather on the actual cash value of the vehicle at the time of the loss.

Can I File a Total Loss Insurance Lawsuit?

So far, a number of class action lawsuits have been filed against major insurance companies, including GEICO, alleging they have underpaid insurance claims by leaving out associated sales taxes and fees, failing to compensate policyholders for sales tax, title transfer fees, and other associated fees.

In 2018, a federal judge in Florida ruled in favor of the plaintiff who sued GEICO.

If you bought or leased a car or motorcycle in the last five years that has since been totaled, your insurance company may have paid for the vehicle’s value but failed to pay all of the associated fees and taxes. Therefore, you may still be owed compensation and may be eligible to file a lawsuit for insurance underpayment.

Filing a lawsuit can seem like a daunting prospect, especially after an accident or while dealing with insurance, so Top Class Actions has laid the groundwork by connecting you with an experienced attorney.

Consulting an attorney can help you determine if you have a claim, navigate the complexities of litigation, and maximize your potential compensation.

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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21 thoughts onWhat Constitutes a Total Loss Vehicle?

  1. Miriam Gutierrez Roman says:

    My car was stolen, from the street, that person drove my car and have car accident. Insurance never pay the hold amount to the financial bank, I pay the rest of the money to the bank. My car was total loss

  2. Lena Miller says:

    My Riveria by Chrysler, a 2006 where airbags did not deploy and my husband died, was classified as a total loss and two weeks later was being soldon a used car lot for sale . When I inquired about it, they told me I could purchase it back for $19,000.00.

  3. Lena Miller says:

    My Riveria by Chrysler, a 2006 where airbags did no deploy and my husband dies, was classified as a total loss and two weeks later on a used car lot for sale . When I inquired about it, they told me I could purchase it back for $19,000.00.

  4. Gayle says:

    Was hit by underinsured motorist that had geico. They initially came out offered 500 for my bumper. Then upon tear down my garage found extensive damage. Geico totaled out my car, I am still driving as of today has 122,280 actual miles. They wanted me to get salvage title and undervalued my car. Help

  5. Art says:

    I’ve had Geico insurance for number of years!! A few total loss vehicles. Please help

  6. Corlisa Warren-Spurlock says:

    Add me

  7. Andrea M DeGeorge says:

    I had a total loss claim in 2020 my insurance was geico. I had full coverage.

  8. Tamra Hubbart says:

    Add My Wife

  9. Melinda Morales says:

    Add me

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