There is a one in seven chance the next time you are involved in a car accident, one of the two vehicles will end up being deemed a total loss by the insurance company, according to CCC Information Services data compiled by AutoTrader.com. Though the term “total loss” sounds very ominous, the classification could actually end up benefiting you in certain situations.
What Is a Total Loss?
In its simplest terms, a total loss claim is when the cost to repair a damaged vehicle exceeds its retail or blue book value. The vehicle also may be irreparable for whatever reason.
Some states require insurance companies to follow statutory definitions of total loss before filing the claim. Wisconsin, for instance, mandates a vehicle is a total loss if its damages exceed 70 percent of its fair market value while in Iowa it is 50 percent of its value, reports Claims Journal.
Those with older vehicles have a bit of an advantage if their vehicles are totaled. A pre-1990 car or truck made of metal as opposed to fiberglass can absorb side impacts much better and minimize mechanical damage. However, a dented door in a 1989 Chevy Van, valued at about $2,500 in good condition, can cost well over that amount for a replacement or repair and paint job.
In these situations, you may actually be able to keep your car and get a settlement check from the insurance company to do with as you please. However, there may be some repairs you’re required to complete with the funds before the Department of Motor Vehicles (DMV) will allow the car on the road, but these will only be mechanical repairs, nothing aesthetic. Thus, if the accident only caused cosmetic damage to the vehicle, there’s a good chance you’ll get to keep the car and get a check minus any deductible and fees.
Once a car is deemed a total loss by the insurance company, most states require the DMV to issue a “salvage title” on the vehicle. Some cars that have not been in car accidents are also issued salvage titles in some states such as those damaged by floods or hail, explains Edmunds.
Whether you can keep the vehicle or not will again depend on state statutes and your individual insurance policy. In most cases the insurance company will transfer the title to its name and simply issue you a check for the vehicle’s value minus any deductible and other fees. The settlement check should be an amount fairly close to the market value of the vehicle.
Keep in mind if you choose to retain the vehicle, it will be difficult to sell afterwards. A salvage title is a red flag for car shoppers because they have no way of knowing what damages were actually done to the vehicle, short of seeing the insurance adjuster’s estimate. Salvage vehicles also are very difficult to insure. It’s best to keep the insurance documents from the accident handy if you plan on selling the vehicle after it has been totaled.
Know and Defend Your Rights
Every state is different as to how it regulates auto insurance companies. The subsequent several weeks after totaling your vehicle are going to require you to make some very important decisions.
The National Association of Insurance Commissioners has a page that links to every state’s insurance department for you to become familiar with local statutes. This will be the first place you go to clarify steps in the process and if you feel the insurance company is not giving you a fair shake. Use Kelley Blue Book to get an estimate of your vehicle’s market value and compare it to what the insurance company is offering. Anytime there are injuries or loss of life, it’s best to speak with an attorney to understand the situation completely and learn your options.
Car accidents resulting in total losses are stressful enough before trying to navigate insurance and legal procedures. The more you know from the beginning, the smoother the entire process will be.