How Do Insurance Companies Decide to Total a Car?

anoop kCar Accidents

Following a serious car accident, there is one important decision that your insurance company will make that could have a dramatic impact on your life and finances. That decision is whether or not to declare your vehicle as “totaled.”

Many times after a car accident, your vehicle will need only minor repairs to get it back to its condition prior to the crash. This could include anything from minor bodywork to replacing a windshield. In severe accidents, however, the cost of repairing a vehicle can actually exceed the cost of replacing it. When this occurs, your insurer will refer to it as a total loss. When your insurance company determines a car is a total loss, they will offer you a monetary settlement equal to the value of the vehicle. But how do insurance companies decide to total a car?

How Insurance Companies Calculate a Total Loss Value

Determining whether a car is totaled or not boils down to identifying the total loss value of a car and comparing it to the cost to repair the vehicle. However, more goes into this process than simply plugging two figures into a calculator. This process starts with determining the actual cash value of your car.

When your insurer determines the actual cash value of your vehicle, they are not determining what it is worth in its damaged form. Instead, this calculation is designed to identify the value of the vehicle moments before the accident occurred. Because your insurer cannot travel back in time to make this determination, they can only use comparisons to similar models and account for the condition your vehicle was in prior to the crash.

Most insurance policies give the insurer the right to pay the owner of a damaged vehicle the actual cash value of the car instead of paying for the repairs. Generally, the insurance company will decide to do this when the cost of repairs is a certain percentage of a vehicle’s actual cash value. Every insurer evaluates cars differently, and these values can also differ across state lines. That said, insurance companies rarely pay for repairs that cost more than 80 percent of the actual cash value.

Factors that determine a total loss

Every insurance company uses their own metrics to determine a vehicle’s actual cash value. However, these companies typically rely on the same metrics. Some of the factors that insurance companies commonly consider include the vehicle’s:

  • Make
  • Model
  • Mileage
  • Prior damage
  • Wear and tear
  • After-market accessories

The process of evaluating a wrecked car starts with an adjuster assessing the car’s condition. It should come as no surprise that the better condition your vehicle was in prior to the crash, the more it will be worth to you following a crash. If your car was in perfect condition, you will likely receive a substantially better settlement offer than if your vehicle was worn down or damaged. While every car is different, insurers are far less likely to try to repair older, worn-down vehicles.

Insurance Payouts

When an insurance company determines your car has been totaled, they will give you two options in most states. The first is to agree to accept a cash settlement for the actual cash value of the vehicle. This involves taking ownership of the damaged car and paying you for its value.

The other option is not available in every state. However, some states will allow you to “retain the salvage.” When this occurs, you retain the ownership of the vehicle and keep the wreckage. Additionally, your insurance company pays you the difference between the actual cash value and the value of the salvage you have retained.

Let a car accident attorney negotiate on your behalf

Sometimes, your insurance company will offer you far less for your vehicle than you believe it to be worth. The good news is that you have the right to negotiate with your insurer over the vehicle’s value. While your insurance company may pressure you to accept their valuation, there is no requirement that you do so. A car accident lawyer in New York at our firm has valuable experience in dealing with these insurance companies and can negotiate on your behalf. To learn more, contact Douglas & London right away.

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