How Will My Auto Insurance Company Total My Vehicle After an Auto Accident?
A car is considered totaled when the cost to repair the damage exceeds a certain percentage of the total value of the vehicle itself. Therefore, minor damage to an old clunker of a car may qualify it as totaled, whereas extensive damage to a newer, nicer car may not.
Some insurance companies consider your car totaled once repair costs exceed 51 percent of the vehicle’s worth; others use 80 percent as their limit. Once it is determined that your car is totaled, your insurer will pay you the car’s cash value, minus any deductible you may have in your coverage. If your insurance company considers your car totaled, but you want to keep it anyway, they will pay you the vehicle’s cash value minus deductible, and then subtract the amount of money they would have gotten from the salvage yard as well. Then it is up to you to pay for the repairs.
The terms of an auto policy should be that your insurer does not have to pay more than your car is worth, but they are supposed to reimburse you to the point that you are in more or less the same place financially as you were before the accident. So, if you drove a ’98 Honda Accord before the accident, you should be able to buy a ’98 Accord in the same basic condition with your claim check (minus, of course, your deductible). This is not always the case, however.
Keep in mind that the insurance company is not required to pay off your auto loan when they total your car. This can be a pressing issue if you have purchased a brand new vehicle and financed it for a long period of time as there is a good chance that a some point in your loan repayment you will owe more than your car is worth. This problem could be eliminated if you choose to purchase loan gap coverage.
If the money your insurance company gives you for your vehicle is significantly less than the current market value for that vehicle, you may choose to bring in an independent appraiser, though this will probably be at your own expense. If that does not net favorable results, you may have to resort to arbitration, or even litigation. This is a worst-case scenario, but it never hurts to know all of your options ahead of time.
