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When you think of a total loss, you probably picture a major wreck where a two-ton piece of machinery is crushed like a tin can.
In actuality, even a minor claim for something like a low-speed fender bender can turn into a total loss declaration if the value of the vehicle is low. That’s why it’s so important to understand how total loss claims work.
It’s the claims adjuster’s job to investigate a claim. They will assess the damage, estimate how much repairs will cost, and calculate your car’s fair market value.
After all is said and done, settlement offers are written up, and you’re given an opportunity to decide what you’d like to do. Here’s what you need to know about total losses and how insurers handle them.
How much will your policy pay to repair damages?
A Personal Auto Policy has limits as to how much will be paid out when you file a damage claim. If you sustain damage to your covered auto, it’s important that you review your contract closely.
Almost all contracts say that your comprehensive and collision benefits will only pay up to your car’s Actual Cash Value to pay for accident repairs.
When is a car declared a total loss?
In most cases, your car is declared a total loss when the full cost of repairs is higher than your vehicle’s Actual Cash Value. In some states, the damage only needs to exceed a Total Loss Threshold (TLT) for the car to be damaged.
The TLT is how high the damage ratio must be before the car is eligible for a salvage title.
The TLT can range between 50 percent and 100 percent depending on the state that you live in.
Do you have to accept a settlement for a total loss declaration?
You shouldn’t jump at the first settlement you’re offered. It’s possible that the total loss declaration that you’re presented could be avoided if you learn how to negotiate. If the insurer estimates your car’s value to be very low, it could easily be totaled.
Here are a few ways to drive up the value of your car:
- Ask the adjuster to add vehicle features that were left out of the appraisal estimate
- Ask the company to narrow down the inventory of cars in the comparable list
- If there are no similar cars in your area, ask the company to expand the search vicinity
- Simply ask for a higher value and some adjusters have a small amount of wiggle room
- Provide your listings and local ads
Your Options When Your Car is Totaled
If there’s no avoiding a total loss, you have to learn how to handle the claim from this point on. When the settlement offer is sent, you have to sign a Power of Attorney form and submit your title as soon as possible.
While it’s common for vehicle owners to sign their cars over to the insurance company after they are totaled, it’s not a requirement.
You do have the option to keep your vehicle if you have a sentimental attachment to it or if you don’t mind repairing the damage on your own.
What happens to your claims payment if you keep your car?
If you keep your car, you won’t receive the full settlement offer. Instead of receiving the full value of the car, your settlement offer will be decreased by the car’s salvage price.
The salvaged price is how much the car is worth at the end of its useful life. All totaled cars have a diminished value once they have a salvage title.
What does the company do with the car if you sign it over?
If you decide that it’s too much of a hassle to repair the car, you still might be interested in knowing what your car’s fate will be once you sign it over. While the company does take ownership of written off cars, they don’t hold onto them in a junkyard lot forever.
While the company does take ownership of written off cars, they don’t hold onto them in a junkyard lot forever.
Instead of holding onto the cars for extended periods of time, the insurance company that takes over the car will sell the car to a salvage vendor that works with a local Department of Motor Vehicles. The vendor then works with buyers and dealers to sell the car based on state-specific regulations.
The vendor then works with buyers and dealers to sell the car based on state-specific regulations.
Your Insurer Will Help You Negotiate
You don’t always have to fight your insurance company to get paid. If the accident was obviously the other party’s fault, their liability insurance will pay for your vehicle.
Instead of trying to get more from your insurer, your adjuster will try and get more for you by communicating with the other adjuster and leading the negotiations.
Think Twice About Keeping Your Car
Not all carriers are willing to insure totaled cars. If you’re going to keep a car with a salvage title, you should check to see if it qualifies for auto insurance coverage. Make sure that you can find a carrier to insure it before you keep a car that you can’t drive.
If you’re buying another vehicle, it’s time to shop the market to see how much it costs to insure a different model. Use an online insurance comparison tool to find the best prices and then you can decide which car is best for you.
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