What Happens When a Car Is Totaled?
- Insurance companies establish internal calculations and strategies to determine the actual cash value (ACV) of a damaged vehicle. Age, depreciation and condition of the car are taken into consideration when calculating the car's ACV. Typically, when the value to repair or salvage of the car is more than the actual cash value of the car, most insurance companies consider the vehicle to be totaled or a total loss. Some companies consider the car to be a total loss if the value to repair the vehicle plus the total cost of expenses for you to use a rental car exceeds more than 50 percent of the ACV. After you report the accident to your insurance company, a representative from the claims department will evaluate the vehicle and make repair costs and value estimations. Many insurance companies use computer databases to generate the final calculations. If your car is not paid for at the time of the accident, you will have to pay the difference between the ACV and the remaining balance on your auto loan.
- Should you have collision and comprehensive coverage on your insurance policy, the insurance company will pay you the actual cash value for your car minus the deductible. Generally, the insurance company will write you out a check in the amount of the determined ACV. If you have Guaranteed Auto Protection (GAP) insurance, it should cover the full difference between your car's ACV and the remaining balance on an auto loan. Typically, GAP insurance must be purchased within 12 months of purchasing or leasing a vehicle.
- The insurance company owns all rights to your totaled car after they pay you the ACV. At this point, most insurance companies auction the car to a salvage business. Insurance Auto Auctions list salvage auctions held around the country. For example, on July 14, 2009, there were 26 auctions being held in various states with over 6,200 vehicles for sale. These cars are often considered a total loss by the insurance company but can be repaired or salvaged by an experienced automobile mechanic.
- Before you decide to keep a totaled car, make sure the vehicle can pass state inspection. After the car passes inspection, you will need enough money for repairs. Should you let the insurance company keep the car then later decide you want the vehicle back and the insurance company has already submitted the car for auction, you may have to buy the car back at an auction. Some states such as Alabama, Colorado, Florida and Georgia require you to get a car dealers license before you can buy and sale at an auto auction.
- Negotiate a higher cash value for your totaled car if you feel the vehicle is worth more than the insurance claims adjuster has reported. To do this, show regular maintenance records on the car. You can also provide the insurance company with receipts from upgrades, such as a new engine or upholstery, you have made to the car. Pictures taken of the car throughout the time you have owned the vehicle can also help to support your argument. If this does not work, you might have to hire an independent automobile appraiser to assist you with the negotiations. Keep the costs of repairs and appraiser fees in mind if you decide to take this route.