When Is a Car Totaled?

If an accident causes enough damage to your vehicle, you may have your car totaled by your insurance company.

How Is a Car Totaled by Insurance?

After an accident (or in case of one), you may be wondering: exactly how is a car totaled by insurance? An insurance claims adjuster makes the determination of whether to repair the damaged vehicle or to consider it a total loss insurance claim. After an accident, your car may be declared totaled if the damage to the vehicle is so great that it outweighs the value of the car. In some cases, the cost to repair a vehicle may completely eclipse the car’s value.

Most insurance companies will declare a car to be totaled if the cost to repair is between 70% and 75% of the car’s total value. For example, if a car is worth $10,000 but needs $7,000 in repairs following a car accident, an insurance company may declare the vehicle a “total loss”.

But how is a car totaled by insurance from state to state? In some cases, there are state laws which dictate the requirements for totaling a car. For example, Alabama state laws say that a car can be totaled if the damage is over 75% of the car’s total value.

If a car is older, and therefore has a lower value, it may be more easily declared a total loss. In contrast, expensive cars need to sustain a lot of damage in order for them to be declared a total loss.

How Much Do I Get Paid if My Car Is Totaled?

The settlement amount for a totaled vehicle may depend on the type of insurance, All State explains, mainly, whether or not you have comprehensive coverage or collision coverage.

Comprehensive coverage helps to replace or repair a vehicle if it has been stolen or damaged outside of a collision. Collision coverage helps to replace or repair a vehicle if it is damaged in a collision. In some situations, either of these coverage plans is necessary in order to help with the cost of a new vehicle.

If you are eligible for a settlement after you have your car totaled, the insurance company will calculate your payment based on your vehicle’s total value.

How Is Totaled Car Value Determined?

When surveying accident damage, an appraiser will consider the vehicle’s cash value prior to the accident in addition to adding up the costs of repairs. Each insurance company has its own way of calculating a car’s value, but the calculation will often consider the type of car, the age of the car, the car’s condition, and whether or not the accident was partially your fault.

If the accident wasn’t your fault, the party at fault should have property damage liability insurance to cover the repairs or to provide you with the car totaled insurance payout owed you if the vehicle is totaled.

A total loss settlement should also include the fees, taxes and cost of replacing a car, including title and registration fees. If an insurance company fails to include these costs in the settlement, consumers may not get the full car totaled insurance payout that they are legally owed.

What Is Actual Cash Value?

Actual cash value is the amount the vehicle was worth before it was in the accident, minus any depreciation from its original cost.

Consumers should do their own work to find an estimated actual cash value to figure out if the deal you’re being offered is in the right ballpark. There are a number of online tools available for this kind of estimate, but also consider looking at local classified ads for cars of similar kind and quality for a base estimate as well.

Total Loss Threshold vs. Total Loss Formula

Another factor that plays into the question “How is a car totaled by insurance?” is the math that an insurance company uses to determine a total loss. Some states set a percentage of the car’s total value that must be met before a car can be deemed a total loss. For example, a car may be considered a total loss in Florida if the damage is equal to 80% of the car’s value, but in Colorado, the threshold is 100%. That means the same vehicle with identical damage may be repaired rather that totaled in Colorado.

In a state where a total loss formula is used, the insurance company inputs numbers for repairs, the scrap value of the car, the car’s actual cash value, and other pertinent figures into a formula to determine whether or not to total a car.

Why Does a Car Depreciate?

All vehicles depreciate, which means they lose value, after they have been purchased. Some vehicles may lose more than 20% of their original value within the first year of ownership, followed by a loss of 10% each subsequent year.

The older a car is, the less its actual cash value. According to Kelley Blue Book, the average price of a car in the U.S. was $37,185 in May 2019.

What Can I Do if My Car Is Totaled?

Make sure you know your car owner rights under federal and state laws. Each state has different requirements for insurance companies and knowing these laws can help you be sure that you are getting the total loss settlement you deserve.

An individual can’t really calculate whether their car is a loss. Every insurance company has its own way of plugging in numbers, even in states that have total loss formulas. In addition, insurance companies have their own proprietary software that they use to refine their estimates. But consumers need to pay attention to the final insurance figures to ensure they are getting the full value due them.

You may also want to be proactive about the settlement process. Looking up your car’s value on Kelly Blue Book and holding the insurance accompany accountable for a proper investigation may be key. Advocating for your rights can help you to get the maximum settlement. In some cases, speaking to a qualified total loss attorney can help you negotiate with your insurance company.

Can I File a Total Loss Insurance Lawsuit?

A number of class action lawsuits have been filed, alleging companies have underpaid insurance claims by paying actual cash value but leaving out the associated sales taxes and fees. Certain major companies have been hit with total loss insurance litigation, including GEICO.

Settlements have been reached in connection to these class action lawsuits, providing compensation for up to thousands of consumers who are affected by underpaid total loss payments.

Recently, Ohio-based Grange Indemnity Insurance agreed to pay into a total loss settlement to resolve claims that they underpaid total loss settlements to consumers. Plaintiffs in the case claimed that Grange failed to compensate insured parties for sales tax, service fees, transfer fees, and title fees.

Although Grange has not admitted to any wrongdoing, the company has agreed to establish a settlement fund to resolve the claims against them. In total, the company will pay over $12 million in cash benefits to eligible consumers.

The settlement benefits Ohio consumers insured by Grange who had their car totaled and submitted a claim with the insurance company between May 27, 2004, and July 22, 2020, for individuals insured by Grange Indemnity Insurance Co., or between June 9, 2005, and July 22, 2020, for individuals insured by Grange Insurance Co. (formerly Grange Mutual Casualty Co.), Grange Property and Casualty or Trustgard Insurance Co.

Under the settlement terms, Class Members can collect cash payments for service fees, transfer fees, and title fees. Payments for these fees will vary depending on the date of the total loss payment but will be between $9.50 and $21. The range for sales tax payments will be much larger but will be paid according to Ohio’s average sales tax rate of 7.1%.

In order to receive these payments, Class Members must file a valid claim form by Dec. 31, 2020.

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

Filing a lawsuit can be a daunting prospect, so Top Class Actions has laid the groundwork for you 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.