When a car is totaled, your insurance company will pay you the actual cash value (ACV) of your vehicle. The ACV is the market value of your car before the accident occurred. It’s important to note that this value is not the same as the price you originally paid for the vehicle, nor does it take into account any loans you may still owe.
The insurance adjuster will assess the value of your car by considering several factors, such as:
Make and model: The specific type of vehicle you own affects its value. Luxury or rare models may be worth more, while older, common vehicles might have a lower value.
Age: Newer cars typically have a higher value, while older cars tend to depreciate over time.
Mileage: The number of miles on the car can also impact its value. Lower mileage usually means a higher value.
Condition: The general condition of the car, including the body, engine, and interior, is taken into consideration.
Recent upgrades or modifications: If you’ve recently upgraded your car with new features, these might increase the value.
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What Happens After Your Car Is Declared a Total Loss?
Once your car is declared a total loss, the insurance company will typically guide you through a process that includes:
Receiving a settlement offer: The insurance company will calculate the actual cash value of your car and present you with a settlement offer.
This amount is supposed to reflect what your car was worth just before the accident. It’s essential to review this offer carefully and negotiate if you feel it’s too low.
Settlement payout: After you accept the offer, the insurance company will issue a payout. If you own the car outright, you’ll receive the full amount. However, if you have an auto loan, the lender will be paid first, and any remaining balance will be sent to you.
Signing over the title: In most cases, you’ll need to sign over the car’s title to the insurance company, as they take possession of the totaled vehicle. The car will likely be sold for parts or scrap.
Replacing your car: After you receive the payout, you can use the money to purchase a new vehicle. Keep in mind that the settlement may not cover the cost of a brand-new car, especially if your car had depreciated significantly.
What If You Still Owe Money on a Totaled Car?
If you’re still making payments on your car and it gets totaled, things can become a bit more complicated. The insurance company will pay the settlement directly to the lender to cover the balance of your auto loan. If the settlement amount is less than what you owe on the loan, you’ll still be responsible for paying the remaining balance.
This is where gap insurance comes into play. Gap insurance is designed to cover the difference between what you owe on your car and its actual cash value in the event of a total loss. If you have gap insurance, the policy will pay off the remainder of your loan after the settlement from your regular insurance is applied.
For example, if your car is worth $8,000 but you owe $10,000 on it, gap insurance would cover the $2,000 difference.
What If You Don’t Agree with the Insurance Company’s Valuation?
upgrades or maintenance work you’ve recently done. These documents can help increase the valuation of your car.
Get a second opinion: You can have an independent appraiser evaluate the car to provide an alternative valuation.
Research comparable cars: Look up similar vehicles in your area to see what they’re selling for. If you find that cars of the same make, model, year, and condition are selling for more than your settlement offer, present this information to your insurance company.While negotiating with an insurance company can be challenging, it’s worth trying if you believe you’re being shortchanged.
What Happens If You Keep the Totaled Car?
In some cases, you may decide to keep your totaled car, especially if the damage is mainly cosmetic, or you think you can repair it yourself. If you choose to keep the car, the insurance company will still calculate the actual cash value but will subtract the salvage value (what the car is worth in its damaged state) from the payout.
For example, if your car’s ACV is $7,000 and its salvage value is $1,000, you would receive $6,000 if you decide to keep the vehicle.
If you keep the totaled car, it will typically be branded with a salvage title, which means the vehicle is considered a total loss by the insurance company. This can make it difficult to insure or sell the car in the future.
What Happens If the Accident Was Not Your Fault?
If another driver is responsible for totaling your car, you’ll generally make a claim with their insurance company under their liability coverage. The process of declaring the car a total loss and determining its value is similar to what you’d experience with your own insurance company.
However, if the at-fault driver is uninsured or underinsured, you may need to file a claim with your own insurance under
uninsured/underinsured motorist coverage if you have it. In this case, your insurance will pay out, and they may attempt to recover the money from the at-fault driver later.
Conclusion
Dealing with a totaled car can be overwhelming, especially if you’re unsure how the insurance process works. The key things to remember are:
A car is declared totaled when the repair costs exceed its actual cash value.
The insurance company will pay you the actual cash value of your car, minus any deductibles or salvage value if you choose to keep the car.If you owe more on your car than it’s worth, gap insurance can cover the difference.
You have the right to negotiate if you believe the settlement offer is too low.
If someone else is at fault for the accident, their insurance should cover your losses.
By understanding these steps, you can better navigate the insurance process and get back on the road as smoothly as possible after your car is declared a total loss.
