Accidents can range from minor fender benders to full-fledged catastrophic collisions. When your vehicle is in a serious accident, it may be deemed a total loss. But what does that mean for you? Let’s take a look at what this means and what happens during this process.
A total loss after a car accident can mean one of two things. Either the cost to repair your vehicle exceeds its worth, or the wrecked vehicle is impossible to repair. Your vehicle's recycling or salvage value is also considered in determining a total loss.
Heavy structural damage, deployed airbags, or extensive water damage are all indicators that your vehicle may be a total loss. Your insurance company will make the final determination after assessing the value and condition of your car after the accident.
Most insurance companies follow a simple formula to determine the value of a total loss. The Actual Cash Value (ACV) is determined by subtracting the replacement value from your vehicle's Pre-Loss Fair Market Value. The pre-loss fair market value will be established based on the car's make, model, age, mileage, and condition prior to the accident, then adjusted for depreciation. In other words, if:
ACV < Repair Cost + Salvage value = Total Loss
ACV > Repair Cost + Salvage Value = Repair
Different insurance companies will have different thresholds for determining a total loss. For instance, some may see 80% of the ACV as the cut-off point, while others may have a lower figure.
Once your car is assessed and deemed a total loss, your insurance company will write it off.
The vehicle will be branded as salvage, meaning it can no longer be registered for driving on public roads. In most cases, these types of vehicles are sold to salvage dealers for parts or scrap metal.
Your insurance company will pay you the Actual Cash Value of your vehicle. This payment will go to the leasing company for those leasing the vehicle. The ACV takes into account depreciation plus any applicable taxes and fees. It may also cover your towing and storage costs related to the accident if necessary.
You are not obligated to accept the settlement from your insurance company. You have the right to challenge the amount they have offered. It is important to remember that the actual cash value will not equal what you originally paid for the vehicle or what you would get if you sold it yourself.
Unfortunately, if your vehicle is deemed a total loss, the insurance claim will likely remain on your record. You may be charged higher rates when you purchase a new car and seek insurance coverage due to this previous claim. That is true even if you weren't at fault for the accident.
Not all policies are the same. First, make sure to check your policy documents. Usually, you can be reimbursed for a rental car while your claim is being finalized or your vehicle is being repaired.
Some companies pay until the payment for a total loss is completed. Others may cover a fixed amount of time, which generally hovers around 30 days.
Insurance companies will do their best to settle the claim for as little as possible. They may undervalue the vehicle or deem it a loss prematurely. Since a totaled car typically results from a severe accident, they may also offer an inadequate settlement for the associated medical expenses.
If you are in a situation where your car has been ruled a total loss or are not happy with the amount offered by your insurance company, get help.
At Bart Durham Injury Law, our car accident lawyers have years of experience fighting for fair settlements on behalf of injured individuals in Kentucky and Tennessee.
Contact us today for a FREE consultation.