The term “totaled” comes from the insurance term “total loss.” Put simply, when the cost of repairing a damaged vehicle exceeds the cost (or a set percentage of the cost) of repairing the vehicle, it makes little financial sense to spend the money for repairs. The insurance company calls the vehicle a total loss, and gives you cash for the vehicle.
Many drivers are upset when an auto insurance company tells them that their car is totaled. When we think of a totaled car we think of a mangled pile of steel. Since the decision to total the car is based on the amount of money it would cost to fix the car, some vehicle owners (especially those who are attached to their vehicle) will want to look for other options.
In certain states, drivers have some recourse, and can work with the insurance company on determining what will happen to the vehicle. For instance, shopping around for better estimates from trusted body shops, or finding shops that will use non-manufacturer parts, may lower the cost of fixing the vehicle. Check out state websites and know your rights.
It’s important to keep in mind that the total insurance companies are working with includes the cost of repairs, your rental vehicle, towing, storage, and any other incidental expenses associated with a lengthy and complicated repair. You may also be able to keep the vehicle if you are hopelessly attached (it is your property after all), but the insurance company will not be able to get paid by the salvage yard, and this may affect your payout.
How “Actual Cash Value” is Calculated
If your vehicle ends up totaled, despite your efforts to work with your insurance company, you will be given the “actual cash value” of the vehicle (or “ACV”). This amount is based on a claim adjuster’s estimate of what the car may have been worth prior to the accident. In many cases, the payout provided falls short of the true cost of replacing the vehicle.
Totaled vehicles are not good for the driver, and not good for the insurance company. So drive safe and avoid accidents!
If the airbags deploy, is the car totaled?
One commonly held belief is that deployed airbags automatically render the car ‘totaled.’ While deployed airbags alone will not total a car, the cost of replacing the airbags can push the calculation for repairs higher than the ACV of the vehicle. Each individual airbag is likely to cost at least $1,000, with additional costs to replace modules or other related parts.
What happens if you total a leased car?
An accident with a leased car can be very expensive for the driver. If you total your leased vehicle in an accident, your insurance will be on the hook to pay out the ACV to the leasing company. The problem that can arise in this situation is that the driver will still be liable for the remaining payments on their leasing schedule. Oftentimes, the amount remaining on the lease exceeds the insurance payout, causing the driver to pay the rest.
Making the Most Out of a Wrecked Car
If your vehicle has been totaled in an accident, it is important that you take the following steps following the accident in order to salvage the unfortunate situation as best as you can. Following a total loss accident, both you and your insurer have options. Before explaining these, you should know the things to do after your accident.
Clean out your car.
Be sure to remove all personal belongings and papers from the vehicle. Depending on what happens next, you may not be able to access them later.
Report the accident and file your claim immediately.
A total loss claim can sometimes take weeks to complete, and the sooner you file your claim, the sooner the insurer can begin working on it. Don’t procrastinate!
Have the vehicle towed to the insurer’s preferred repair shop.
If you think there’s a good chance the car has been totaled, have it towed to a body shop preferred by the insurance company. Many companies have shops they work with, and you may speed up the claims process by using one of their shops. You can have your car towed to the tow company’s lot, but they’ll probably charge a storage fee. The preferred shop will usually hold your car without this fee.
Locate your title.
This is no time for your title to go missing. If your car is a total loss, you’ll have to sign the title over to the insurance company. If you can’t find it or you’ve lost it, you’ll have to file for a lost title at the DMV, delaying the claims process.
Review your car loan.
Knowing the balance on your car loan can prepare you in case the outstanding loan is greater than the current value of your car. Insurance loss claims are not paid out on the basis of what you still owe but on the current value of the vehicle.
One form of protection against this situation is to purchase what is called gap insurance. This pays the difference between what your car is worth currently and the amount you still owe on your loan. A rule of thumb for gap coverage: If you are less than halfway through the term of your loan – say two years on a five-year loan – having gap insurance is probably a good idea.
Do your own research.
This is not a requirement, but doing research at websites like Kelley Blue Book (kbb.com) can help you determine if the payout offered by your insurer is reasonable. Also, if you’ve made any recent major upgrades, it’s a good idea to collect the receipts as the improvements may be a factor in your final payout.
Fill out all required paperwork quickly.
Total loss situations often require a lot of paperwork, and finishing it as quickly as possible helps to speed the process. If you have an outstanding loan on the car you’ll probably need a signed, notarized power of attorney transferring ownership to the insurer once the loan is paid off. Be sure to sign your name exactly as it appears on the car’s title.
The Insurer’s Options
In a total loss situation, your insurer can choose whether to replace your car or reimburse you with a check. If they offer a replacement, it must be a make and model comparable to your totaled vehicle, and the condition must be as good as or better than your car was before the accident. The insurer must also buy from a legitimate dealer, and if it’s not more than three-years-old, provide a warranty.
Your Options
- You can reject the replacement vehicle offered by your insurer, and the company can then settle the claim by paying you the price it would have paid for the replacement— including taxes and transfer fees.
- If within 30 days of receiving a cash settlement you find a replacement that costs more than the settlement, your insurer must either pay to cover the difference, find a cheaper car or negotiate a lower price.
- This requirement does not apply, however, if your settlement was based on the price of a replacement car you refused to accept.
Keeping Your Totaled Vehicle
If for some reason you want to keep your totaled vehicle, it can be fairly difficult to do under Illinois law. Some of the factors that impact this choice will include:
- To discourage “chop shops” – criminal operations that break cars down for their parts – Illinois law says if your totaled vehicle is less than 9 years old, you must turn it over to the insurer with the title.
- If the totaled vehicle is 9 years or older, you may keep it. However, it becomes a “salvage vehicle,” and these cannot be legally driven on Illinois roads.
- If your totaled vehicle has only sustained extensive hail damage but is otherwise drivable, your insurer may allow you to keep it.
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