What Happens When Your Car Is Totaled?

A total loss car accident is a car accident in which your vehicle is determined to be “totaled,” or damaged beyond repair. This decision is made by your insurance agency after a variety of factors are considered. So when your car is totaled by insurance, what happens?

How Does Insurance Decide When a Car Is Totaled?

If the cost to repair your damaged car is close to the cost to or higher than the value of the vehicle, your insurance company may decide to total your car. This determination is made based on a number of factors, and these factors can vary depending on where you are.

A car is not declared a total loss just because a vehicle’s airbags are deployed. The costs to replace the airbags and repair the vehicle may not exceed the value threshold which would make it a total loss.

Insurance companies use actual cash value, or fair market value, to determine the worth of the vehicle. Actual cash value means the amount that your car would cost in an open market. This number may also be referred to as the replacement cost of the vehicle. Insurers use several methods to determine this number, including recent sale prices for similar vehicles nearby, the mileage and existing damage to the vehicle, and any add-ons or extra features.

After the market value of the vehicle has been determined by your insurance agency, the insurer will connect you with a claims adjuster. The job of the claims adjuster is to assess the damage to your vehicle and estimate the cost of repairs. Once this number has been estimated, the insurance company will compare the market value with the cost of repairs and determine whether your car is totaled.

Insurance companies automatically decide that a car is totaled when the damage to the vehicle is higher than a set percentage of the actual cash value of the car. This percentage is often called the Total Loss Threshold. In most states, the Total Loss Threshold is determined by state law. It is usually around 75% of the car’s value.

If the cost of repairing the car’s damage is higher than the Total Loss Threshold, it is an automatic total loss. If it is less than the Total Loss Threshold, the insurance company may offer you a payout to fix the damage when your car is damaged. If it is more than the Total Loss Threshold, they may offer you a sum meant to cover your car’s replacement.

Will My Insurance Cover the Costs Of A Totaled Car Claim?

Insurance can cover the costs of a totaled car, in what is known as a totaled car claim. However, the type of coverage you can get depends on your insurance. People with either comprehensive or collision coverage may be able to receive money when they make a total loss car claim.

Consumers with collision coverage are covered if their car is totaled during an accident caused by another driver. However, these consumers may not compensated for an accident that was not anyone’s fault. For example, if a tree falls over onto a parked car and results in total loss damage, consumers may only be compensated if they have comprehensive insurance coverage.

What Happens When Your Car Is Totaled?

When your car is totaled by insurance what happens first is that the company must determine proper compensation for its value.

If your insurance company determines that your car is totaled, there are a few different ways that they may compensate you for its value. Your insurance company may replace your car with a comparable vehicle, offer you a cash payout based on the value of comparable cars in your area, or offer you a cash payout based on other appraisal methods, such as the Kelly Blue Book.

If you accept the payout from your insurance agency, the company will take ownership of your car. The damaged vehicle is then often sold to a salvage yard for scraps. It may take a few weeks or several months to receive your insurance payout depending on your insurance company’s protocol.

However, some victims of total loss car accidents believe that insurance companies use inaccurate information in order to estimate the value of vehicles. If you believe that your insurance company deliberately undervalued the cost of your vehicle after it was totaled, you may be able to seek legal representation and file a class action insurance lawsuit.

While most insurers use traditional appraisal methods, some insurers have started using artificial intelligence to aid them in determining the total value of vehicles. These AI programs are able to analyze photos of the damaged vehicle and identify individual auto parts before determining whether the parts are repairable, replaceable, or undamaged.

According to the creator of the program that assesses photos of the damaged vehicle, using AI systems to determine whether a car is totaled may be a more effective way to determine the appropriate compensation for victims. However, some victims claim that these AI systems have offered them substantially lower amounts for their vehicles than they actually deserved. In one case, a man whose car was totaled claims a photo estimator program initially offered him $1,700 for his vehicle. However, his insurer eventually agreed that the true cost of repairs was almost $12,000.

Previously, insurance companies have been investigated after consumers have claimed that they purposefully offer lowball settlements for totaled vehicles. These inadequate offers allegedly relied on inaccurate information. According to one consumer report, they were offered a low compensation settlement after their SUV was stolen in 2018. When determining the value of the vehicle, the man’s insurance company adjusted the settlement amount by citing problems with the vehicle’s transmission and engine, in addition to damage to the interior of the vehicle. However, as the vehicle was never recovered after being stolen, the owner claims that this report was falsified.

If I Still Owe Money on A Car Loan and My Car Is Totaled, Do I Still Have To Pay Back The Loan?

If you have insurance and your car is totaled, but you still owe money on a car loan, you do still have to pay the loan. In these cases, the insurer will usually pay what is owed on the car to the lender, and then give you the rest of the money if there’s any left.

If you owe more than you get in your insurance claim, you still will be responsible for paying the remainder of the loan. In some cases, someone who takes a loan out on a car can have the cost of their loan covered under loan or lease GAP coverage in the instance that they may owe more than they get from a totaled car claim. GAP insurance may be offered as a package or as standalone coverage, but is associated with increased premiums.

Do I Have to Accept a Total Loss Offer?

When your car is totaled by insurance what happens afterward? The mistake that most people make when the car is named a total loss is to assume that any money from the insurance company is a gift that should be immediately accepted. The truth is that there is an option to negotiate just as if you are selling the car if it didn’t have any damage to the vehicle.

In addition to the statewide guidelines about what’s paid out when the car is a total loss, each insurance company has its own internal guidelines about how and when they’re willing to work with someone.

Those policies inside the company don’t change very frequently, so anyone buying an insurance policy should first review all of the fine print to understand the situations in which the insurance company is likely to say the car is a loss.

Once you already have a policy and are dealing with a situation involving significant damage to the vehicle, reviewing that policy in full equips the policyholder with the best chance to negotiate.

Be aware that there are some things about the process of arriving at a number on the insurance company’s end that you should question. For example, sometimes the carrier won’t select vehicles that are truly comparable to your own. The mileage and vehicles should be similar. If you have a unique car, it will be harder for the insurance company to find something comparable.

A consumer is well within their rights to do their own research on comparable vehicles and to question the methods used by the insurance company.

In many cases, benefits that come with a total loss claim should cover the cost of the car, as well as other costs associated with recovering from the accident, like sales tax and title transfer fees. Many customers claim that insurance companies should cover these costs, arguing that they are unavoidable costs associated with totaling a car. However, some insurers do not cover this cost.

In several total loss claims class action lawsuits, consumers claim that their insurance policies cover costs other than just the cost of the damage, but their insurers fail to pay this. So, some consumers may contact an attorney to help them make the strongest claim possible and help them get the most money that they can from their claim.

Total car loss lawyers can help you make sure you are getting all of the money to which you are entitled.

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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