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UPDATED: Jul 6, 2017
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After a serious accident, you are happy to make it out of your vehicle in one piece.
It is not out of the ordinary to be so grateful that you are safe and sound that you do not even begin to think about what will happen to your vehicle after it is inspected by a claims estimator.
Once the vehicle is towed away and you get home, you will quickly realize that the nightmare is not over as you start the claims process. The last thing that you want to hear is that your beloved car has been deemed a total loss.
Unfortunately, many insurers will classify cars that have significant structural damage as a total loss if the repairs exceed just 80 percent of the car’s market value.
Here’s your guide to total loss payments so you know your rights before accepting a low settlement.
If you are shopping for a policy, start comparing car insurance rates now by using our FREE tool above!
When is a car considered to be totaled?
As someone who has never dealt with a total loss claim, it is easy to assume a total loss will have major front end damage or a bent frame that is impossible to repair.
While these are reasons that claim adjusters will total out a car, some vehicles that are functioning and look to have minor damage can be totaled too.
What you consider totaled and what an insurance company considers totaled may be two very different ideas.
A generic definition of a total loss when the cost to repair a vehicle is higher than the vehicle’s Actual Cash Value (ACV).
While all vehicles with exorbitant repairs and low values are deemed totaled, consumers might be surprised to learn that their high-valued car is being totaled even though damage is not higher than value.
In every state, there is a figure called a Total Loss Threshold (TLT). The TLT is a damage ratio that the state says must be met before a car is salvaged.
Instead of requiring the damages to exceed the value of the car, the state may allow the insurer to total cars where damage exceeds the TLT.
Make sure you find out what the TLT is in your state so that you know your rights.
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What are your rights when your car is totaled?
While there is a streamlined claims process, it is important that you know that a one-size-fits-all valuation approach never works. This is why you have the right as a consumer to negotiate the value of your vehicle and appeal decisions.
If your insurer has taken the cost of repairs and salvage value and discovered it is higher than the ACV, you have probably been notified that the car has been declared a total loss.
If you disagree, you will need to do your homework so that you are equipped to fight the decision.
Here are some steps you can take:
Step 1: Review Your Policy Terms
It is best to review your policy before an accident occurs, but it is never too late to discover what the fine print says.
It can be hard to understand all of the complex terms and legalities in the booklet, but you should skip to the claims settlement or vehicle valuation portion to see what the company’s version of a total loss is.
If the booklet and the claims adjuster’s explanation are not matching up, it may be time for an appeal.
Step 2: Check with the Department of Insurance
Every state has its own Department of Insurance. The department’s entire purpose is to protect consumers from unfair business dealings with insurers so that the industry stays fair and competitive.
If you suspect that the company is not complying with regulations, check with the department. They should have resources online for the fair claims settlement practices and a contact number if you have inquiries or complaints.
Step 3: Estimate the Worth of Your Vehicle
There are two factors you may not agree upon with the insurer:
- The ACV of your car
- The evaluation of damage
As a consumer, you can negotiate the value of your car. The claims department is not going to advertise this, but if you disagree, you do not have to just take their word.
Claims departments use dealer surveys, pricing sites, value guides, private party sales information and other resources to calculate the value. They will also factor in the title, the sales tax, and the registration costs.
This information may not always be accurate in establishing the actual worth of your car.
If you have add-ons, low mileage, a rare make, or other features that were not used in determination of value, you may request an independent appraiser.
If you cannot come to an agreement, the claim could go to court. Sometimes, the insurer will raise the value just to avoid delays and court costs.
Step 4: Assess the Damage
If you agree on the value of the car, you are one step closer to settlement. The last step is agreeing on the evaluation of damage.
The insurer will send an estimator to do a physical inspection. They will estimate the cost of repairs and may have a body shop do a survey for a more detailed look into the costs.
If you believe the costs were inflated to declare a total loss, you can have your own estimator or body shop evaluate the damage.
How much will you receive if the car is totaled?
How much you receive from your insurer depends on the total costs and fault. If you were not at fault, you will be reimbursed for the actual cash value of the car, the cost of towing, and the cost of your rental car.
If you were at fault and did not have supplemental coverage, you may not receive payment for your replacement. Consumers who keep their totaled vehicle will receive a payment for the ACV minus the salvaged value.
It is your right to get treated fairly when you file claims. If you are not happy with the service you received, you should start to shop for a different policy.
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