Car accidents can be unsettling experiences, and one of the most pressing concerns after a collision is how your car will be handled by your insurance company. When the damage is severe, insurance companies might declare your vehicle a total loss. In this article, we will dive into the nitty-gritty of what happens to your car when insurance totals it, ensuring you have a clear understanding of the process and its implications. Let’s explore this journey in detail.
1. Assessment of Damage
Vehicle Inspection: The first step in this process is a thorough inspection of your vehicle by a claims adjuster. This professional assesses the extent of the damage and its repair costs. They will compare the repair costs to the car’s actual cash value (ACV) to determine if it’s more cost-effective to repair or declare it a total loss.
Total Loss Threshold: Insurance companies typically set a total loss threshold, which is a percentage of the ACV. If the repair costs exceed this threshold, they’ll consider your car a total loss. The threshold varies among insurers but generally ranges from 70% to 80% of the ACV.
2. Declaration of Total Loss
Communication with the Policyholder: Once the assessment is complete, your insurance company will contact you to inform you of their decision. They will explain that your car is deemed a total loss and provide details on the next steps.
Title Transfer: In most cases, your insurance company will request the title of your car, as they’ll need to take ownership of the vehicle. This ensures that the salvage value and remaining components are properly managed.
3. Compensation
Payment Calculation: The compensation you receive for your total loss vehicle is based on its ACV, considering factors like the make, model, age, mileage, and condition. Your insurance policy’s terms and your deductible will also impact the payout.
Salvage Value: In some cases, you may have the option to buy back your totaled vehicle at its salvage value, allowing you to repair and continue using it. Discuss this option with your insurance provider.
Paying Off the Loan: If you have an outstanding auto loan, the insurance payout will typically be directed to the lender to clear the loan. Any remaining amount, if applicable, will be issued to you.
4. What Happens to the Car
Salvage Auction: Insurance companies often sell totaled cars at salvage auctions. This is where they recover some of the costs incurred in settling your claim.
Repairs and Resale: Some vehicles may be repaired and resold by the insurance company. However, they are usually labeled as salvage or rebuilt titles, which can impact their market value.
Scrap or Part-Out: For severely damaged vehicles, they may be scrapped, or their parts may be sold separately. The decision depends on the extent of damage and the potential value of salvageable parts.
5. Impact on Insurance Premiums
Claim History: Having your car declared a total loss can affect your insurance premiums. Your claims history and the circumstances of the accident can lead to increased rates.
Loss Settlement and Premiums: Your premium rates may also be influenced by the way your insurance company handles the loss settlement. Some insurers offer accident forgiveness or policies that don’t increase premiums for not-at-fault accidents.
FAQs about what happens to your car when your insurance company declares it a total loss
What does it mean when an insurance company “totals” my car?
When an insurance company declares your car a total loss, it means the cost to repair the vehicle exceeds its actual cash value (ACV) or a certain percentage of the ACV, depending on the insurance company’s policy. In such cases, they will typically offer you a settlement instead of repairing the car.
How does the insurance company determine the actual cash value (ACV) of my car?
The ACV is determined based on factors like the car’s age, make, model, mileage, condition, and the local market value of similar vehicles. Insurance adjusters use these factors to estimate the fair market value of your car.
What happens after the insurance company declares my car a total loss?
Once your car is declared a total loss, you’ll be offered a settlement, which is usually the ACV of the vehicle minus your deductible. You can choose to accept this settlement or negotiate it with the insurance company.
Can I keep my car if it’s declared a total loss by the insurance company?
In many cases, yes. You can choose to keep the car and accept a reduced settlement (minus the salvage value of the vehicle). However, be aware that it will have a salvage title, and you may need to make necessary repairs to make it roadworthy.
What is a salvage title, and how does it affect my car’s value?
A salvage title is issued to a vehicle that has been declared a total loss by an insurance company. It indicates that the car has been significantly damaged and repaired. A salvage title can significantly lower the car’s resale value, and some potential buyers may be hesitant to purchase a vehicle with this title.
Can I choose to have my car repaired instead of accepting the settlement?
In most cases, you can choose to have your car repaired, but it depends on the insurance company’s policies and your specific policy. If you decide to repair it, the insurance company will provide you with the estimated cost of repairs and may deduct your deductible.
What if I owe more on my car loan than the insurance settlement offers?
If the insurance settlement is less than what you owe on your car loan, you may be responsible for paying the remaining loan balance. Some insurance policies offer gap insurance, which can cover the difference in such situations.
Conclusion
Understanding what happens to your car when insurance totals it is essential for every car owner. It can be a complex process, but with the right information, you can make informed decisions about your insurance coverage and what to expect if you find yourself in this situation. Remember that insurance policies and procedures may vary between providers, so always consult with your insurer for specific details regarding your case.
