Options When Your Car is Totaled

Options When Your Car Is Totaled

What are your options when your car is totaled by the insurance company? Insurance companies will generally declare your vehicle to be a total loss when either:
1) the cost of repair + the salvage value of the damaged vehicle total more than the pre-loss actual
cash value of the vehicle;
2) the vehicle is in such a state post-loss that it could not be fixed and still be deemed a safe car.

(Some states have laws that specify when a vehicle must be declared to be a total loss.)

Click here to read more on what determines whether a vehicle is totaled.

Totaled Car

Once your vehicle is declared a total loss, how much you collect from your insurance will vary based upon the pre-loss condition of your vehicle, the mileage on the vehicle, the options on the vehicle, the size of your deductible, and the quality of your insurance coverage.

The pre-loss actual cash value is usually determined by looking at what similar vehicles in the area (similar mileage, condition, model, options) are selling for. Kelley Blue Book is often the starting point.   The more miles are on your car, the lower the value. The more options, the higher the value.   If your vehicle had significant pre-existing damage (such as hail damage or significant rust) then there would be a deduction for the vehicle’s worse than average condition.

What If I Disagree With The Value The Insurance Loss Adjuster Assigns To My Car?

If you feel that the insurance company has offered you too little for your totaled vehicle, your first step should be to conduct some basic research. There are a variety of websites you can use to help determine an approximate value of your vehicle.   You can go to Kelley Blue Book, Edmunds, NADA, and other websites.   When using these websites, it is important that you are realistic about the condition of your vehicle. A small percentage of used vehicles qualify as being in “excellent” condition.

When you go on the internet and look at what dealers are asking for used vehicles, remember that the prices shown are often the starting point in negotiations. Often times, such vehicles actually sell for less than that. In some cases, they sell for much less.

If, after you have done your research, you still feel that the amount you are being offered is too low, you can talk with the insurance adjuster or with your insurance agent and the insurance adjuster about your concerns.   You will want to present the facts from the research you have done and will want to lay out why your research points to a higher valuation.   Sometimes adjusters miss options, are not aware of improvements (you just put on new tires, new brakes, and a brand new muffler) or they get other specifics wrong.

If you can’t reach agreement with the adjuster on the value of your car, you can request that the appraisal process be invoked. Usually, this process involves you hiring an appraiser and the insurance company hiring an appraiser. If they can’t agree on a value, then they mutually select an umpire and they each present their appraisal to the umpire.   The umpire then makes the final call.

Special Equipment can impact the market value of your vehicle and your policy may or may not cover equipment that has been added to your vehicle. If you have added after market equipment such as winches, tool boxes, toppers, DVD systems, refrigerated storage compartments, subwoofers, ground lighting, towing equipment, and wheel chair lifts you will want to discuss these items with your insurance agent to make sure you discuss your coverage alternatives. You do not want to find out after the loss that these items are not covered. Any items that are not covered will not be included in the calculation of the actual cash value of the vehicle for the purposes of loss determination.

The Insurance Company Has Determined The Value Of My Totaled Vehicle – What Are My Options? Can I Keep The Vehicle?

Once the actual cash value is determined, you have several options:

  • You can elect to have the insurance company take the vehicle in as salvage. Generally, they will then owe you the pre-loss actual cash value of the vehicle minus your deductible.   In more than half the states, your insurer is required to include sales tax in the value of the vehicle.  After all, if you go buy a replacement vehicle, you will have to pay sales tax.   Depending on the state you are in, your insurer may also be required to cover the cost of the registration and title on the replacement vehicle. When you get the total loss statement from your insurance company, if you do not see line items for tax, title, and registration ask the adjuster if the state requires the insurer to reimburse you for those items.
  • You can elect to keep the vehicle.  You may want to keep the vehicle for parts, fix it yourself, or you might even want to drive it as is.   While driving it “as is” may sound a little crazy, there are examples where this makes perfect sense.   For example, often times, an older vehicle that sustains significant hail damage will be totaled by the insurance company. It might still be completely safe to drive as is. If you elect to keep the totaled vehicle, your insurer will then generally cut you a check for the pre-loss actual cash value of the car, minus the salvage value of the vehicle, minus your deductible.   In many states, your vehicle will now have a “salvage” title. If you subsequently try to resell the vehicle, a “salvage” title can dramatically reduce the vehicle’s value

My Car Was Totaled? Will My Insurance Company Buy Me A New One?

If you purchased either “new vehicle replacement coverage” or “stated amount coverage,” you may have other options available to you after your vehicle is totaled.

New Vehicle Replacement: A number of insurance companies offer new vehicle replacement coverage. This coverage option varies tremendously from insurer to insurer. It usually will offer something akin to replacing your vehicle with an equivalent new one that is equipped similar to yours.   If you totaled your 2014 Ford Taurus in 2016, you might be able to replace it with a similarly equipped new 2016 model.     New vehicle replacement endorsements sometimes are limited by time or miles. They may only apply for the first 15,000 miles, may only apply for the first 18 months you own the vehicle, and they may only apply to vehicles you purchased brand new.   If you want this type of coverage, talk to your agent about the various options that are available. As most new vehicles lose several thousand dollars in value when you drive them off the dealer’s lot, this is a nice coverage option to have on newer vehicles.

Stated Amount: Some insurers will let you insure your vehicle for a stated amount.   If your vehicle is totaled, that will then be the agreed value of the vehicle.   This can be an attractive option for some buyers and can help address some unique situations.

Summary:

As you can see, there are numerous coverage options and insurance policies vary tremendously on the coverage that they provide.   You should talk to your insurance agent about your own situation, about any special equipment you have on your vehicle, and about the policy valuation options that make the most sense for you.   If you have a custom vehicle, a rare vehicle, a modified vehicle, a classic car, or an antique auto, you will want to make sure you explain the situation to your agent to make sure the proper options are presented to you so you can secure the proper coverage that will respond the way you want it to when the loss occurs.

Other Enhanced Insurance articles related to Auto Claims:

Bodily Injury in a Car Accident; Are You Covered

What to Do after a Hit and Run Accident

Salvage Value of My Vehicle

Who Is At Fault in a Car Accident

What to Do After an Accident

How Is the Value of My Car Decided

Who Decides What Will Get Fixed on My Car

What Does It Mean when a Car Is Totaled

How Much Will It Cost to Fix My Car

What Does It Mean when a Car Has a Salvage Title

What Do I Do If I Am Dissatisfied with My Auto Insurance Claim

My Car’s Market Value

Enhanced Insurance is not written by attorneys. If you’re looking for legal advice, you need to contact a lawyer. Further, insurance practices and forms change constantly and are varied from state to state. For definitive answers in your area, contact a local agent.

Although this introduction to some of the potential valuations used in personal auto insurance is lengthy, it doesn’t cover every possible insurance coverage needed and does not go into detail on some of the restrictions and limitations that may apply to each coverage. It also does not address every possible special situation. You should consult a professional agent to discuss your exposures and coverage needs.   It also is important that you read your insurance policies, as doing so will often make you aware of important exclusions, conditions or restrictions.

While the majority of people want an agent involved in their purchase of insurance, many people want to see if they can save money by buying direct from the insurance company. Others want to try a direct quote to make sure the premium they’re now paying through their local agent is fair. If you want a quote for your coverage, click on the competitive quote button on the right side of this page.

Jim Ketterson is an insurance expert with more than 25 years of experience in the industry. He has served as a President of an insurance company, an insurance underwriter, and has held various roles in insurance company product management. He has his Chartered Property Casualty Underwriter designation and a MBA in Finance. The information he offers in his posts is general in nature and may not be appropriate, accurate, or applicable in all situations. Before making any important insurance decisions, you should seek the advice of a qualified insurance agent and discuss the particulars of your individual situation. Follow Jim on Twitter @MNinsurancePro

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