Getting into a car accident is stressful enough, but when your car is so damaged that it’s deemed a total loss, the situation can feel even more overwhelming. A “total loss” occurs when the damage to your car is so severe that it can’t be repaired safely, or when the cost to repair the car exceeds its value.
If you find yourself in this situation, it’s important to understand the steps you need to take to protect yourself. Here’s what you need to know about how insurance companies handle total loss claims and how you can get the most out of your settlement.
What Does it Mean for Your Car to Be a Total Loss?
A car is considered a “total loss” when:
- The damage is too severe to repair safely.
- Repair costs exceed the car’s value.
- The vehicle no longer meets regulations or safety requirements
The insurance company will perform one or multiple inspections on your vehicle. Once it’s a total loss, the insurance should reach out to notify you. At that point, the insurance adjuster will typically ask you to:
- Remove personal items from the car
- Leave a key with the car or arrange to give one to the adjuster
- Provide your account number and contact information for any finance or leasing company
- Complete necessary forms to finalize the claim
What Will the Insurance Company Pay for a Total Loss?
Losing a vehicle, especially if it’s a car you’ve grown attached to, is difficult. But when your insurance policy covers a total loss, the insurance company is required to pay:
- The actual cash value (ACV) of the car, based on its pre-accident condition, minus your deductible.
- State taxes, license, and transfer fees.
- The insurance company may either take ownership of the vehicle and sell it to a salvage buyer or, if you prefer, you can retain the car (though this may reduce your payout).
How is the Value of Your Car Determined?
While your car may hold great sentimental value, the insurance company will assess its value based on the market value of similar vehicles in your area, factoring in:
- Mileage
- Vehicle options (such as leather seats, sunroof, etc.)
- Any pre-existing damage (not caused by the accident)
This value is typically drawn from sources like Kelley Blue Book or other market tools. While the amount may feel insufficient, it’s important to know that insurance companies are often focused on paying as little as possible. This is where negotiation comes in.
How to Get the Most for Your Total Loss Settlement
If you’re not satisfied with the settlement offer, you have the right to dispute it. Here are a few steps to ensure you get the best possible settlement:
- Request the Valuation Report: This document explains how the insurance company determined your car’s value. It lists factors like make, model, mileage, and condition.
- Review Comparable Vehicles: Check to see if the vehicles used for comparison in the report are truly similar in age, condition, and location. If they aren’t, that could be grounds for dispute.
- Challenge Unfair Deductions: Insurance adjusters may lower the settlement amount based on the condition of your car. If the deductions seem unreasonable, provide evidence like maintenance records or photos showing the car’s condition before the accident.
- Provide Your Own Comparable Examples: Research similar vehicles in your local market and share this data with your insurance adjuster to strengthen your case.
- Consider Hiring a Professional Appraiser: If negotiations hit a dead end, an independent appraiser may be able to provide an unbiased assessment that could help increase your settlement.
Taking these proactive steps can significantly improve your chances of receiving a fair payout.
Can You Dispute a Total Loss Vehicle Settlement?
Yes, if you disagree with the insurance company’s valuation, you can take action. Most insurance policies include an appraisal provision that allows either party to request an independent appraisal if a dispute arises.
- Two appraisers are selected (one by the insurance company and one by you).
- If the two appraisers can’t agree on the settlement value, they will choose a neutral umpire to make the final decision.
The decision made by two of the three (either the appraisers or the umpire) is binding, and each party pays for their appraiser, while the umpire’s fee is typically split.
What If You Want to Keep Your Total Loss Car?
You might have reasons for wanting to keep your totaled car—perhaps for parts or sentimental value. If so, you can usually retain ownership, but the insurance company will reduce your settlement by:
- The value of the car (minus your deductible)
- A fair salvage amount, which is the value the insurance company would have received from selling the vehicle to a salvage buyer.
In California, for example, you’ll need to obtain a salvage certificate for your vehicle. This certificate marks it as a total loss and prevents you from potentially making another total loss claim. The vehicles resale value will also be affected.
Who Gets Paid for a Total Loss?
How the payout is distributed depends on your ownership situation:
- If you own the car outright, the insurance company will pay you directly.
- If the car is leased, the leasing company will receive the payout.
- If the car is financed, the finance company will receive the payment. If the settlement is higher than what you owe, you’ll receive the balance. However, if the settlement falls short, you’ll be responsible for paying the remaining loan balance.
If you have gap insurance, it can cover any remaining loan balance if the settlement is insufficient to pay off the loan.
What Do You Drive While Waiting for a Settlement?
If your policy includes rental coverage, the insurance company may provide you with a rental vehicle while you wait for the settlement to be processed. However, they will typically only cover a rental for 4-7 days, so make sure to discuss your needs with your insurance adjuster.
Having your car totaled can be a major inconvenience, but understanding your rights and the insurance process can help you get the best possible outcome. If you’re facing challenges with your total loss claim or settlement, don’t hesitate to reach out to a legal professional who can help guide you through the process and ensure you receive a fair offer.
If you need assistance with a total loss claim or other accident-related legal matters, call TraumaLaw at 866-608-3601. We’re here to help you navigate the process and get the compensation you deserve.
