What is a Total Loss?
A total loss is insurance language meaning your car has been “totaled”, or otherwise damaged beyond repair. A total loss occurs when the cost of repairs exceeds the market value of your vehicle. However, not all vehicles deemed a total loss by the insurance company are unusable. Let’s talk about the process for determining a total loss and what your options as an insured vehicle owner are.
Determining if Your Car is a Total Loss
“Damaged beyond repair” might be a slightly heavy-handed term. When a car insurance company determines whether or not your car is totaled they are looking at it from a cost-analysis perspective. That means they want to take the path that costs the least (to them).
Let’s say you were rear-ended and that damaged your rear fender, both tail light assemblies, and broke the rear window. It may look like your car could be repaired. A new bumper, tail lights, and back glass and you’d be set right? This is where your car insurance company starts their analysis. Let’s say those repairs cost $3,300 and the value of your car (let’s say it’s a 1998 Nissan Altima) is about $3,500. It is possible your car could be considered a total loss. If the cost of repairs meets or goes over the $3,500 value of your car, then it’s definitely totaled.
What happens if Your Car is deemed a Total Loss?
You will have two options. The first is to accept it and then wait for an offer from your car insurance company. They are supposed to pay the market value of your vehicle at the time of the crash, so do your due diligence and check online and with local auto dealers to find out the value of your vehicle to double-check against the car insurance company’s offer. They usually aren’t too far off, but it’s always a good idea to be well-informed.
Your second option is to try and convince the insurance company not to total the vehicle and instead make the repairs. This would apply if you have a rare or hard-to-find make and/or model. Please note that this may not be an option in all cases as some damage may be so costly that an insurance company will not pay it. Also, some states have laws preventing owners from driving vehicles that have sustained certain types of damage (such as damage to the vehicle frame), in addition to laws preventing the resale of such a damaged vehicle. Check your local laws and your car insurance provider’s policies to fully understand your options regarding a totaled vehicle.
Auto Insurance A to Z
It’s easy for a lot of folks in auto insurance to forget that most people don’t know what they’re talking about when they refer to liability coverage or an SR-22. Our Auto Insurance A-Z Guide helps decrypt things, unpacking these concepts into a language you and I can understand.