The Total Guide to a Totaled Car
You have been in a car accident, and your car is now damaged beyond repair. All is not lost. The reason you carry auto insurance is to protect you in these situations.
Depending on state laws and who is at fault for the accident, you may be dealing with your own insurance company or the other driver’s. If you are at fault, the loss of your car will only be covered if you carry collision insurance. Similarly, if the damage wasn’t due to an accident – a tree fell on your car, for example – then it’s only covered if you carry comprehensive insurance.
Here’s what you need to know when the damage is so severe that your car has been totaled.
When Is a Car Considered Totaled?
A “totaled” car has enough damage that the insurer regards it as a “total loss.” This means that rather than helping you repair your car, you will get a cash payment from the insurer.
If you’re involved in a serious accident, there’s a good chance your car has been totaled, but an insurance adjuster will make the final determination. If the adjuster thinks the car is worth less than the cost to repair it, or if he or she thinks the car cannot be safely repaired, the insurer will notify you that the car has been totaled.
It’s not always possible to assess all the damage until the repairs have begun, so insurers will total a car with apparent damage that falls well below 100 percent of the car’s value. Sometimes state law dictates the amount of damage necessary to total a car, and this threshold can be as low as 50 percent of its value.
How Much Will You Be Paid For Your Totaled Car?
The insurance company will determine a replacement value for your car, but you don’t have to accept their valuation.
Compare their estimate to car value websites like the NADA Guides and Kelley Blue Book. Check local advertisements and check with nearby car dealers for similar used vehicles. Make sure the valuation takes into account the car’s mileage and all of its optional features. Do you think the insurer is undervaluing your car? Then it’s OK to push back. If you and the insurance company can’t agree, you can often ask for an independent appraisal.
Once you and the insurer agree on a value, you will be paid that amount minus any deductible. In some states the payout will include the taxes and fees necessary to purchase a replacement car.
Some insurance policies offer optional “new car replacement” or “better car replacement” coverage that that can pay you more. Read your insurance policy documents to understand what your coverage provides.
What If You Have a Lease or Auto Loan?
If you’re leasing your car, the insurer will pay the leasing company. If you have an auto loan, your insurer will first pay off the loan before paying you any money. If your car is worth more than you owe, you will be paid the balance.
However, if you owe more than your car is worth, you still owe your lender the difference. A gap insurance policy, if you have one, can protect you from this risk. Otherwise, you’re on the hook for the balance of the loan.
Can You Keep and Repair Your Totaled Car?
Even a fender bender may render a very old car or a high-mileage car a total loss. In many states you are permitted to keep your car and pay for the repairs yourself. In this case, the insurer will deduct the car’s salvage value – what they would have gotten selling your car to a junkyard – from what they pay you.
Be realistic, though. You may think that your car needs only minor repairs to be roadworthy, but even a minor accident can make your car unsafe to drive – or unsafe in the case of a future accident. It’s not worth risking your safety or the safety of your passengers.
There also may be a lot of red tape involved in getting your car back on the road. Your car will probably be issued a “branded title,” “salvage title” or “salvage certificate” until repairs are completed and inspected. You may have to pay substantial fees to get the car inspected and titled so that you can drive it again. Your local DMV can give you details about the rules and costs associated with getting a salvaged car back on the road.
It can also be difficult to get insurance on a car that has been salvaged and rebuilt.
Finally, the total loss will be part of the car’s vehicle history report, and you may have a special title that indicates the car has been rebuilt, which means a totaled car can be difficult to sell later on.
Image: Monkey Business Images/Shutterstock
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