When your Car is Totaled
After an accident you may find yourself with a totaled car and no idea what to do next. As a general rule, once your car is towed away, the matter is out of your hands. Your insurance company will determine whether the car is indeed totaled and what that means for you. So the first thing you can do, after calling the tow truck, is look over your auto insurance policy again or contact your insurance agent to find out what your options are.
What is my Coverage?
Some of the most intimidate questions you’ll want answers to are if your policy covers collisions and whose insurance provider will be paying. This is determined by the law, and generally the driver considered at fault will be responsible for covering damages through their insurance. Regardless of who’s insurance is responsible, you’ll want to find out if your own policy covers certain small but essential elements. For instance, will they provide you with a rental car? If so, for how long and at what budget? This is especially important if you rely on your car to get to work, and you may need to start car shopping immediately or else dig into your savings to cover your own rental car in the meantime.
Ideally, you will have already looked at the Gap Insurance on your policy, but if not, now’s the time to find out. Think of this as covering the gap between the value of your car and the amount you still owe to the finance company. If the outstanding balancing on your car loan is more than half of the total, you should definitely have Gap Insurance, because it can save you thousands of dollars by covering some or all of your remaining balance. Those savings will help get you into a new car and back on the road a lot sooner.
How Do Insurance Companies Calculate a Total Loss?
You’ll also want to find out how they determine if your car is indeed totaled. What is their formula? Since 2002, insurance appraisals have ruled post-accident cars to be a total loss about 13 percent of the time. This means you have about a one in seven chance of your car being labeled as totaled.
As a general rule, insurance companies calculate the cost of repairs and compare that to how much they would have to pay you in a total loss claim. The value of your car may also be a factor. For instance, if your insurance company determines your car would be worth more sold for scraps at the salvage yard, they’re more likely to write it off. Essentially, their formulas calculate the cost of repairs minus your deductible and compare that to the value of your car and the cost of repairing the damage versus selling it off and helping you buy a new one.
While each insurance company has their own way of calculating a car’s worth and comparing that to the cost of repairs, state legislation can further complicate that process. Go online to check out your state’s regulations and see how they define a totaled car. You will also want to find a list of your rights and read up on the role and responsibilities of your insurance company. This will help you come to the table informed and empowered in case they try to deny you coverage.
What Can I Expect on the Check?
Once your car has been declared a total loss, the insurance company will either offer to replace the car with a comparable one, or send you a cash settlement for the amount of your car’s market value before the accident. The check can take anywhere from one to three months to reach your mailbox, depending on how long it takes to determine if the car has been totaled. Your insurance company will likely have their own resources to determine the value of the vehicle, but this will often include online pricing sites and sales records of recent transactions. This means that you can cross reference that amount using a blue book or other resources the same way you would if you had decided to sell your car. They will subtract your deductible and any disposal costs from that market value, and they may also add an estimated sales tax as well as the costs of replacing the registration and the title cost of a replacement car.
What is My Role?
While much of what happens after the accident is out of your control, you can and should still take an active part in this process. In addition to looking up the value of your car on your own, you should be paying careful attention to how your insurance company handles your policy. If you believe your rights are being ignored or that elements of your insurance policy are being neglected, by all means contact your insurance agent to discuss it. In addition to doing your own research, you can hire your own appraiser to counter their declaration of value. In most states, laws provide for settlements of disputes between appraisers. The more active your role in the process, the more likely you are to get a fair deal and avoid unnecessary expenses.
Just because your car has been officially totaled, that doesn’t mean you have to buy a new one. Many people decide to keep their cars and repair the damage themselves. Regardless of what your policy covers or how your agent determines the value to cost ration, you may find it is cheaper or easier to repair the car rather than purchase a new one. This is entirely up to you, but if you do decide you will keep the car, be sure to let your insurance company know. Depending on your state’s laws, you may be unable to keep the car once it has been declared totaled, but in either case, your insurance policy will be affected and you will want to discuss that with your insurance agent.