What is Total Loss after a Car Insurance Claim? – ValuePenguin

November 6, 2022

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A damaged car is declared a “total loss” when the estimated cost of the repairs exceeds the actual cash value of the car. This type of claim is slightly different from other minor claims, and requires a little more effort on the part of the insured. Here’s what you need to know about auto insurance claims associated with a total loss.

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total loss and actual cash value claims

To get an insurance payout for a car that is a total loss, you must have property damage liability (PD) or comprehensive or collision insurance on your policy.

Reading: How insurance determines total loss

pd is required in every state, but the only way to get paid is to file a claim against another driver’s pd. In order for you to get pd compensation, the other driver must also have been negligent in the accident.

The easiest and safest way to get paid for a total loss is through your own insurance company, which you can do through collision insurance. With collision claims, it doesn’t matter if you were at fault, although you will have to pay your deductible before the insurer will cover the claim.

Assuming you have this type of coverage, and you’re not injured or busy seeking medical care, your first step after damage occurs would be to file a claim with your insurer as you would for any accident. a claims adjuster will come to inspect the vehicle to assess the damage. this is where the total loss designation will be made.

If the adjuster determines that the cost of repairing the damage to the car is more than it is worth to the car, that is, the repairs exceed the actual cash value, or ACV, of the car, then it is considered a total loss. What constitutes a total loss isn’t always simple, and how it’s actually determined varies from state to state. Some states have a “total loss threshold” (tlt), in which damage only needs to exceed a certain percentage of a car’s value to determine a total loss.

About half of the states use what’s called the “total loss formula” (tlf), where if the sum of the cost of the repair plus the car’s salvage value exceeds the car’s ACV, then it’s considered a complete loss.

what happens if your car is declared a total loss?

If you’re okay with your car being a total loss, here are some things auto insurance companies like Geico and Progressive will require you to do:

The faster you do all these things, the faster and easier the process will be. After a total loss designation, the car is usually towed by your insurance company, which then notifies the DMV that the car has been totaled. depending on the state, the car will be declared “salvage” and any buyer who specializes in salvage vehicles can purchase the car from the company.

If you want to keep the wrecked car, for example to repair it or for sentimental reasons, your company may allow it. if you go that way, you will get less cash. Your payment will be the ACV minus the salvage value of the car. Even if totaled, a salvage car will still have some value in its parts and potential to be restored. Geico tells customers to also note that some states prevent drivers from keeping total loss vehicles, while others will require you to obtain a certificate indicating the car is salvage.

If you don’t agree that it’s a total loss: You can try to negotiate with the claims adjuster. for example, you can argue that they did not fully account for the changes you made. You will be required to submit documentation and any evidence that the car is actually worth more than previously determined. If you believe you did not receive adequate compensation, you can take the case to an attorney to fight on your behalf.

how do you pay for a total loss?

The amount you will be compensated for a total loss is ACV, the same metric used to determine if the car is a total loss. The car’s ACV is determined by its market value before the loss, less depreciation from when it was new. Ultimately, your car’s ACV will be determined by its wear and age along with other factors your insurer deems relevant. It is very different from the number you would find in the Kelley Blue Book or Edmunds.com. Most of the big insurers have their own method for determining ACV.

once you accept the value, the insurer will pay you that amount, if you owned the car. if your car is leased or financed, the compensation goes back to the leasing or financing company.

If you total a leased or financed car, there’s a good chance you’ll have a decent amount left to pay. Although the insurance company will pay you for the value of the car, it is very likely that the value has depreciated and does not reflect the value of the car for which you took a lease. If you drive a leased vehicle, you should consider taking out differential insurance, which would cover any remaining balance on a lease.