Do you know what to expect when your car is declared a total loss?
Unfortunately, all too often people are involved in an auto accident which results in their vehicle being declared a total loss. So what does “total loss” mean? Your vehicle will be declared a total loss if the cost to repair it exceeds the value or a certain percentage of the vehicle’s value.
There are several factors that come in to play when the insurance company is trying to determine if your vehicle should be going to the repair shop or the junkyard.
Some key questions and factors include:
Q: What is the vehicle’s actual cash value (ACV) vs. the repair cost?
Your vehicle’s value (ACV) is determined by factors such as the year of your vehicle, the mileage, the condition as well as the added options on your vehicle, (i.e. leather seats, back-up camera, automatic start, etc.), that may increase the value. Insurance companies do not always use Kelley Blue Book or National Automobile Dealer Association (NADA) to determine the value. Some insurance companies will use their own proprietary software to determine the value based on what vehicles of similar make, model, year, mileage and condition are selling for in your area.
Even the newest of vehicles can be declared a total loss if the damage is severe enough. For older vehicles that are still in good condition before that accident, sometimes a total loss is inevitable even with minor damage simply because of the age of the vehicle.
If the cost to repair your vehicle exceeds the value or is within a certain percentage, usually 70% (this varies slightly with each insurance company), it will be declared a total loss.
Q: Can the vehicle be repaired to safety standards?
Cost isn’t the only deciding factor in whether or not your vehicle is repairable. The insurance company must also determine whether or not it is possible for the vehicle to be repaired to meet safety standards or if doing so is cost-effective. If not, your vehicle will be declared a total loss.
Q: What does that State of Michigan think?
Laws may also play a factor. Insurance companies must also adhere to state laws regarding the standards for declaring a vehicle a total loss. They cannot arbitrarily make the decision without the above mentioned factors while also adhering to state law.
Your vehicle has been declared a total loss, now what?
There are a couple of options your insurance company will give you and some decisions to be made by you:
- Transferring Ownership: You can sign over the title to your insurance carrier giving them ownership. This allows them to properly dispose of the vehicle.
- Keeping Your Vehicle: In some cases people will choose to keep their totaled vehicle. This may be for several reasons but the bottom line is if you choose to do this there are state guidelines dictating how that vehicle will be titled in the future and what insurance coverages are available on a totaled vehicle after it is repaired. It is recommended that you discuss this decision with your agent prior to making this choice.
- Getting Paid: Your insurance company will issue payment to you once you have signed over the title or chosen to keep the vehicle. Obviously, your payment will be reduced by a percentage that is calculated by the insurance company if you choose to keep your vehicle. If there was a lien on your vehicle, you will need to provide proof that lien has been satisfied or your insurance company will contact your lien holder for the pay-off amount and issue payment directly to them, leaving the difference payable to you.
Being in an auto accident and having your vehicle declared a total loss can be an overwhelming situation. There are so many factors involved it is not possible to address them all here. However, in the event you are faced with this unfortunate situation, our claims department is here to answer any questions you may have and help guide you through the process.
|The above is an article written by our Claims Professional, Jen Curtis, for our 2017 Winter Quarterly Newsletter. If you enjoyed this article, we would love to send you more like this! Visit the Newsletter Sign Up page and register today.|