Crash report: What to expect when your car is totaledBy Mason White 11:48 AM March 5, 2014
|Crashed car illustration|
By: Sanvi Rizvi
Of the 25 million car accidents that are reported to insurance companies every year, a vehicle is totaled in about one-fifth of them, according to analysis by AOL Autos.
Sometimes you can tell a car is a total loss just by looking at it, but not always. “Totaled” doesn’t necessarily mean the vehicle will never see the road again, either—in fact, sometimes no one would ever be able to tell a totaled car had been in a wreck.
What Does Totaled Mean?
An insurance company will deem a car totaled (or a total loss) when the amount in damages exceeds a certain percentage of the vehicle’s cash value. The percentage varies from state to state but is generally around 70-80 percent. The actual cash value is determined by the vehicle’s year, model and make, along with the mileage and added features.
A car can be deemed a total loss even if the damages do not exceed the cash value threshold. This happens when a vehicle can’t be restored to a safe operating condition, a common occurrence for cars that sustain flood damage.
An older car involved in a minor fender-bender could be deemed totaled as well, even if you’re able to drive it away from the scene. That’s because the cost of body work on a vehicle from, say, the early 1990s with 150,000-plus miles on it will far exceed its $1,000 to $1,500 cash value.
Once a vehicle is deemed a total loss, the insurance company will owe you a check for the amount of the vehicle’s actual cash value, minus any deductibles. If both parties cannot come to a consensus as to the vehicle’s value, you can agree to hire an independent appraiser.
If the other driver is at fault, and you disagree with the value their insurance company gives, file a claim via your own provider. Your insurance company should then pursue the other driver’s company for reimbursement.
Once your insurance company cuts you a check, the totaled vehicle becomes their property, unless you request to keep it. This essentially means you are purchasing the vehicle back from the insurer for its salvage value.
Salvage value varies by state and insurer, but typically it’s about 75 percent of the vehicle’s market value. In other words, if you decide to keep your 1992 Ford Escort with a $1,500 actual value, the insurer will give you the vehicle and the $325 difference in salvage vs. actual value.
If there is a deductible involved, you may end up paying the difference to keep the vehicle. You’ll then need to obtain a salvage title for the vehicle in order to legally drive it.
When a vehicle is totaled, often a serious injury is involved as well. Thus a larger payout to cover medical expenses could come in the form of a structured settlement. The terms usually can be negotiated, so you can keep your car without subtracting the salvage value.
The remaining settlement would be disbursed via monthly payments for a set period of time. Of course, you may be able to sell all or part of your future structured settlement payments to a company like J.G. Wentworth for a lump sum of cash now.
Again, the above depends on the state where you live and your insurer. Contact your state’s motor vehicle division or your insurance company for information more specific to you.