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UPDATED: Mar 13, 2020
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Most people who buy auto insurance never need to use it. Whenever a car accident does happen, however, the insured wants to know that they will be covered for the value of the vehicle. If the insurance policy has full coverage, the insurer will repair the vehicle up to its worth; if the cost of repairs exceeds the value of the vehicle, that vehicle would then be considered a total loss.
What Happens if I Total My Car?
After an auto accident occurs, you will need to file a claim in order to have the insurance company assess your damage and arrive at a settlement. Once the insurance company takes the claim, the adjuster will confirm the coverage on your policy to ensure that they will be able to cover your loss. Coverage will vary depending on the cause of the accident. For example, an accident between two vehicles will be coded as collision; an act of vandalism will be a comprehensive loss. If your policy includes the coverage that applies to the type of loss, the insurance company will move forward with settlement.
If your policy does not include coverage that applies to the loss, the insurance company will not be able to pay you for the repair or replacement of your vehicle. For example, if you have liability coverage only, the insurance company will pay for damage that you cause but not the damage to the insured vehicle itself. In these situations, it is the owner’s responsibility to handle the totaled vehicle. Most people choose to sell the car to a scrap yard, although some may attempt to repair it themselves or keep the car for parts.
In the event that you do total a vehicle that has no first-party coverage, check with the insurance company to see if they still want to inspect it before selling it to the junk yard. In some situations, examining a damaged vehicle is crucial to the liability investigation and the adjuster will want to see the damage even if it will not be covered.
If you do have first-party coverage that will apply to the loss, then the adjuster will make an appointment to look at the vehicle and assess the damage. After the inspection, they will determine whether or not your vehicle is repairable. If repairs would cost more than the value of the vehicle, they will begin the total loss process.
Once the adjuster determines that the vehicle should be totaled, they will approach you with a settlement amount. This settlement will be the worth of your vehicle less any deductible that you owe for the applied coverage. At this point, you have the option between accepting the settlement or retaining the salvage rights to your vehicle.
If you do choose to salvage the car, you will essentially need to buy the car back from the insurance company at a percentage of its total cost; this enables you to keep the car while receiving a small amount of money as well. Otherwise, if you do not choose to retain salvage on the vehicle, the insurance company will take the car and sell it at auction.
How is Total Loss Value Determined?
Car insurance companies calculate a car’s total loss settlement based on its actual cash value. This figure is usually derived by taking the car’s Blue Book value and averaging it with its market value, then subtracting any preexisting damage or depreciation from this figure.
This calculation is usually handled through a computer program that retrieves quotes from nearby sources; this means that a vehicle might be worth more in one part of the country than another due to the local market. It also means that no two vehicles will necessarily total out for the same value even if their year, make and model are identical.
Total loss evaluations are negotiable to some extent. If you have reason to believe that your vehicle is worth more than the adjuster evaluated it at, you can submit your proof of value and request a higher settlement. This is especially helpful in situations where the vehicle is in pristine condition or has recently had work done to it, such as a new engine or brand new tires. Bear in mind, however, that any after-market additions or customizations made to the vehicle may not be covered by the insurance and will not be included in the total loss evaluation.