What Does It Mean When Insurance Company Totals Your Car
When an insurance company determines that the damages suffered by a car during an accident are in excess of the actual cash value of that car, the insurer will deem it to be a “totaled” or “salvage” vehicle. This means the car is considered beyond repair and the cost to repair it exceeds its value, making it difficult to place a reasonable value on the car. It is then taken off the road and the titleholder of the vehicle is paid the car’s Actual Cash Value or ACV, minus any applicable deductions.
In general, ACV is determined by a formula which includes factors such as vehicle make and model, age, color, and condition. Certain items such as airbags, tires, and other special items may add a bit of value, as well. The insurer may also account for depreciation when calculating a car’s ACV. This happens when a car’s value drops significantly over time. Deductions may also be applied such as a policy deductible or taxes, title and registration fees.
Though it can be an emotional decision, deciding whether to total a car or fix it usually boils down to cost. The fair and realistic costs of repairing the car, plus the percentage of the damage which is covered by insurance, generally determine whether the car is totaled or not. Repairs that require OEM (original equipment manufacturer) parts and labor can significantly increase the repair cost, leading to a totaled vehicle in many cases.
The process of totalling a car is typically straightforward, provided the policyholder is informed and aware of the ACV of their car. When the damages exceed the ACV of the car, the insurance company is required to total the car. The policyholder will then be provided with an payout amount based on the current ACV of the car. Adjustments may be made to the payout after the completion of the repair work, depending on certain factors.
As a professional car appraiser, I often find that a car owner may have overvalued the condition or age of their car. Given the current market rates and my expertise in car valuations, I recommend that policyholders look into the ACV of their cars before getting into an accident. Understanding the car’s value will help them to make an informed decision about whether to repair or total the car.
Though no one wants to be in a situation where they need to total their car, understanding the process and being informed of the ACV of their car will help them make the best decision possible. It is also recommended that policyholders look into salvage or totaled car auctions or buyback programs, as they often provides policyholders with additional opportunities to recoup some of their losses.
Risks of Buying a Salvaged Car
After a car is considered ‘totaled’ or ‘salvaged’, the insurance company may put the vehicle up for auction or on the buyback program to the highest bidder, since ‘salvaging’ a car does not necessarily mean it’s beyond repair, merely that the cost to repair it exceeds its current value. As such, buying a salvaged car, or one that has been totaled, can be risky because it is difficult to estimate the car’s future value, and the unseen and costly damages that could crop up after repairs.
Also, if an insurance claim has already been made on the car, the buyer may not be able to make a further claim if he discovers an issue not covered in the original settlement. Unless the car is bought from a trusted source, such as a certified used car dealer , or has undergone a thorough inspection and licensing process, buyers could be in for expensive repairs and maintenance fees in the future.
For the sake of both safety and wallet, those interested in buying a salvaged vehicle are strongly recommended to get a professional pre-purchase inspection. The same level of precaution and care should also be taken when buying a car that is not salvaged, but that is instead purchased from an individual or from a marketplace.
A buyer should also look into the car’s history by running a vehicle history report from an automotive data provider – this report will generally include the vehicle’s accident history, prior ownership, odometer readings, maintenance records and estimated remaining life, amongst other data.
Car Repairs After Total Loss
Though the insurance company may deem a car a total loss after an accident, it may be possible to repair certain mechanical and electrical systems. Depending on the severity of the damage, some aspects of the car may be inspected and used after the repairs have been made. However, policyholders should be aware that parts used for repair on totaled cars are often salvaged, which always carries a certain level of risk.
In some cases, the Federal Motor Carrier Safety Administration (FMCSA) or the Department of Transportation (DOT) may require the car to be inspected and certified before it is allowed to be driven on the road. Though repairs are possible, safety and usability should always take priority. Many states and insurers set particular regulations and guidelines for repairs on totaled cars.
The inspection process which is necessary for registering a salvaged car in many states often requires the car to pass emissions testing and be certified by an authorized body. Even if a policyholder chooses to repair their totaled car themselves, they must ensure that all the repairs are inspected and certified by someone who is qualified to do so. It is also recommended that the repairs are kept up to date and in compliance with the policies and regulations of the state.
Advantages of a Totaled Car
When an insurance company totals a vehicle, the policyholder is covered for the car’s ACV and all the state fees, taxes and registration dees incurred when they bought the car. However, if the car’s value or the repair costs are underestimated, the policyholder may have to foot the difference themselves. Additionally, the policyholder may ask their insurer to consider the cost of replacement parts which can add to the ACV of the car.
When a car is totaled, the policyholder may also be able to recoup the value of the remaining unused registration fees for the car. There are some states, such as California, that allow policyholders to transfer some or all remaining registration fees from their old car to the new car that they purchase. Knowing this prior to purchasing a new car could provide additional savings.
When an insurance company totals a car, policyholders may also be able to recoup some of the taxes paid on their car. Taxes and registration fees can vary from state to state, so it’s important for policyholders to check with the DMV beforehand to understand the various taxes and fees that are applicable to their state.
In some cases, policyholders may even be able to take advantage of the insurer’s salvage pricing and purchase the car at a price lower than the ACV. Though salvage cars are usually in need of a lot of repair work and may not be in good condition, policyholders who purchase them may be able to recoup some of their losses if they decide to sell the car later.
Insurance Companies Rights to Repair
When an insurance company deems a car to be a total loss, they automatically assume the right to repair the car. If a policyholder is interested in obtaining the car after they have received the ACV paid out, they must make arrangements with the insurer or the salvage company to have the car released to them. Since most insurers prefer not to be liable for a totaled car, they may or may not be willing to provide the car to the policyholder.
In certain states, insurers are barred from repairing a totaled car and must release it to the owner. They may also release the salvage rights of the car to the policyholder’s lienholder if one is involved. In some cases, the insurer can purchase the salvage rights of the car for an additional fee.
If the policyholder decides to take on the responsibility of repairing the car themselves, they should keep in mind that it may be difficult, given that many totaled cars suffer major structural and mechanical damages. Also, since the claim process for totaled cars may vary from state to state, policyholders should check with the DMV beforehand to understand their rights and responsibilities.
State Regulations and Declaring a Total Loss
State laws and regulations impact the process of totalling a car and the lives of motorists who are involved in totalling an accident. In many states, the law requires an insurer to declare a car a total loss if the repairs exceed a certain cost, or the fair market value of a totaled car. This will help insurers decide whether to pay out the Actual Cash Value of the car or to try and repair it.
Also, many states have enacted laws that protect the policyholder’s right to know the ACV of their car, when any repairs are made, and to receive the best service possible when totalling their car. Many states also require the insurer to provide a detailed explanation of the reasoning behind their determination of the ACV such as their valuations, the age of the car, and other relevant factors.
Making an Insurance Claim for a Totaled Vehicle
In most cases, when a car is totaled, the policyholder will need to make an insurance claim. The claim process usually involves completing an accident claim form which should be submitted to the insurer, along with any photographs of the car, vehicle identification information, and the policyholder’s driver’s license. Most claims are processed within 30 days and the policyholder should receive their ACV within 7 to 10 days.
It is important to keep in mind that the ACV of the car can be lower than the amount the policyholder expected or hoped for, so it is important to understand the applicable state laws and regulations, and to read the car’s policy paperwork beforehand. In some cases, policyholders may be able to negotiate with their insurer to get a higher payout. This may be possible if the car can no longer be driven, or if it has been damaged beyond repair.
Understandably, totaling a car can be a stressful experience, and policyholders should ensure that their insurer is acting in good faith throughout the entire process. If a policyholder has any doubts about their insurer’s actions, they should reach out to their state insurance department and inquire about the applicable regulations.
