No one wants to find out that their vehicle has been written off as a total loss. Generally, an accident has to be pretty severe in order to wreck a car so badly that it's no longer worth bringing it back to life. The consequences can range from safe to dire, usually based on the amount of coverage someone has had for their plan. The circumstances will always be unique to any incident.
A total loss is a stressful thing even under the best conditions. Knowing what a total loss exactly means and what your options are going forward will enable you to make the most of a tough situation. In this article, Part 1 defines total loss, Part 2 advises how to speed up the claims process, Part 3 warns that your claim is determined by how much coverage you had, Part 4 suggests ways to deal with a market value payout, and Part 5 gives options for what to do with your car afterwards.
Part 1 of 5: What counts as a total loss?
In the case of a total loss, it basically means that your car has been considered too damaged to be worth repairing, at least from the insurer's point of view. A total loss, according to the Oregon Department of Motor Vehicles (DMV)
, is when the cost of repairing a car is more than what the vehicle is worth. Each state has laws in place regarding what constitutes a total loss; some states base it on a percentage of damage (typically around 70-75%) while others look mainly at dollar amounts or a formula which includes repairs, the pre-accident value of the car, and scrap metal value. You can check up on each total loss threshold by state
. In addition, insurance providers may have their own policies, within state laws, to determine whether a car is a total loss. Due to the differences in total loss laws by state, the same vehicle with the same damage may be considered a total loss in one state but not in another. Or, because of differences with insurance providers, the same vehicle with the same damage may be considered a total loss by one provider, but not another. Always check with your specific insurance provider for information.
A total loss threshold is a fixed percentage of a vehicle's value; if the repairs needed to fix the car go over the limit, it's written off as a goner. Because of this, it should be noted that a total loss does not necessarily mean the vehicle will never be able to drive again, just that it's not financially practical to do so.
With the sheer amount of modern technology and expensive componentry in today’s vehicle, plus the rate of a car’s depreciation, it’s easy to rack up a repair bill that can be thousands of dollars more than the fair market or actual cash value of your car. And, additional factors such as the type, age, and condition of the vehicle and whether it can be safely repaired will be considered when determining a total loss.
Finally, fault may come into play. If you are determined to be at fault in the incident that caused the damage, it may result in your insurance provider reducing the car’s total loss value, where allowed by the law. This is considered "contributory negligence" can reduce the final settlement.
Part 2 of 5: Expedite the claims process by being swift and uncomplicated
If you have been in a crash, one of the first steps you can take related to the total loss process is to fully evaluate and document the damage. Take as many photos of your vehicle as possible. If the vehicle is driveable or you have enough photos, you may be able to request an estimate from a repair shop to compare to your vehicle’s fair market value on web site sch as Kelley Blue Book
. Following the accident, report the accident to your insurance company as swiftly as possible. Obviously in the event of an accident you'll be upset, but getting things addressed quickly will minimize the amount you time you spend dealing with it.
A claim associate with your insurance provider will walk you through the steps based on their policies, but you can generally expect to fill out some forms, have your vehicle title or give permission to your lease or lienholder to discuss the claim with your insurance provider. Under a full settlement, you are generally required to surrender the vehicle to your insurance provider. A partial settlement will give you the option to salvage the vehicle, sell it as a totaled vehicle, or donate the vehicle to charity for a tax deduction.
In most cases, it's usually pretty easy to eyeball whether your car is a wreck or not. If you're preparing for the report of a total loss, go ahead and use the insurer's affiliated towing company and body shop.
This will make the claims process significantly faster. Besides, if you're reasonably sure the care is a bust, it probably doesn't matter a lot where the wreck's being taken.
Part 3 of 5: Your outcome will be determined by the extent of your coverage
If you choose to not dispute the claim and accept a settlement, it will be based on either your vehicle’s fair market or actual cash value, minus any disposal fees or deductibles as agreed on with your insurance provider. Once the amount of the settlement is determined, if you are the owner of the vehicle, a check will be sent to you. If you are leasing or financing your car, the payout will be made to the leasing company or lienholder.
In the event that you opted for a market value payout policy, you shouldn't expect much when it comes to reimbursement. Market value policies keep a customer’s premiums down, but the insurer's definition of "market value" is cynical at best.
You should expect to get only a fraction of the money it would take to get a replacement car. In the case of an agreed value, you'll at least have the peace of mind of accurately knowing how much money you'll be getting.
If you still owed money on the lease or loan, this is where you may get a surprise. Remember, the settlement payoff amount will be based on several factors, mostly your vehicle’s fair market value. Unless you are toward the end of your financial agreement, the payoff for your loan may be more than the settlement and you are responsible for the difference.
One insurance option that can help is called Guaranteed Auto Protection (GAP) insurance. This is a special type of insurance policy that protects the insured from the responsibility of paying for the difference between the loan or lease payoff and the vehicle’s determined value. Check if your insurance provider offers this peace-of-mind coverage.
Part 4 of 5: Coping with a market value payoff
If your insurer has arrived at a value number you're not please with, it's your right to ask the insurance representative how they arrived at that number. Failing that, you may want to do some research yourself regarding the value of used vehicles of similar make, age and wear, based upon the way you car was directly before the accident.
If everything else has been considered and you're left in the dark without the money for a replacement vehicle, it still helps to keep an open eye for new used vehicles on the market. If you're able to go without a car for the time being, the money you'll be saving in gas and insurance can be saved towards saving for a new vehicle. A car rental or basic lease can be helpful to hold you over if you require your car for work.
Part 5 of 5: Repair it yourself, keep it, or donate it
If you've do your own research into the totalled car's market value and refuse the amount the insurer is offering for it, you can choose to keep the car, selling the parts off individually. This is especially fair if there are non-standard and modified upgrades installed in the car.
Depending on your personal appraisal, you may even commit to repairing the car yourself, using whatever alternative settlement from the insurer as a nest egg to fund the repairs. Some people have even donating their vehicles; the parts given can be written off as a tax deductible.
A salvaged vehicle is one that can be rebuilt and inspected in order to be re-registered. If you plan to repair a vehicle that has been deemed a total loss to a legal, safe driving condition, you will need to request a salvage title from your local DMV. Not all insurance companies will provide coverage to a salvaged vehicle, so it is recommended to check with your provider before proceeding.
Some totalled loss thresholds may write the car off completely, but the car itself may still be technically drivable. In this case, you can choose to keep it around with the caveat of having it labelled a "salvage title." If a car's been marked for death by the insurance company, you won't be able to sell it as a "clean" car, and insurance companies will be very weary of insuring it.
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