You’ve been in a car accident. You’ve walked away unhurt and so has the other driver. The insurance company has determined that your vehicle is “totaled.” So, where do you go from here? An accident is a scary enough experience without having to worry about what do to after the dust has settled! So, we decided to share some options available to you if you find yourself in a total-loss situation.
First, let’s define “total loss” according to most insurance companies. A total loss occurs when the cost of repairing your vehicle exceeds a certain percentage of your car’s value before the accident. The percentage will vary depending upon the insurance carrier, but it can be anywhere between 51-80% of the pre-accident value of the car.
If your insurance company declares your vehicle a total loss, it will pay you the actual cash value of the car (pre-accident), minus whatever deductible is associated with your policy. Your car is then sent to a salvage yard to be auctioned off to the highest bidder and chopped up for parts, in which case the insurance company keeps whatever money is made from the sale.
According to CCC Information Services, a company that tracks auto claims for the insurance industry, about 15-20% of collision claims in the United States result in the cars being totaled. With statistics like that, drivers need to weigh their options when it comes to moving forward.
Depending on the state in which you live, you may have the option to retain your vehicle and have it repaired regardless of the cost vs. value determinations. Those states include California, Georgia, Maryland, Michigan, New Jersey, Texas, and Washington. In most cases, however, it is neither recommended nor practical to repair a totaled vehicle, but there are some cases where the vehicle may yet be viable.
Older vehicles, especially ones that do not retain their resale value, tend to be totaled for smaller accidents and mechanical failures like body damage or a cracked axle. In those cases, repair may be a more cost-effective solution than buying, and possibly financing, a new vehicle. Keep in mind that most of the time, it is not a good idea to keep/repair/drive a vehicle that has been deemed a total loss.
The more common option is to take the money offered by the insurance company and put it toward a new car. Because vehicles depreciate on an annual basis, you will probably not recover what you originally paid for your vehicle. Insurance companies look at many variables when determining settlements, including the value of your car in pre-accident condition, mileage, special equipment and after-market features, and local market prices for that particular year, make, and model.
Being in a car accident is never an experience we want to have, but when one does occur, it’s best to understand the process with which you can replace or repair your car and get back on the road. Our goal is to provide you with the best information possible to help prepare you for any challenges you may (but we sure hope not!) experience.
Have you had a positive or negative experience while dealing with your insurance company after an accident? Have you opted to salvage a totaled vehicle rather than try to buy a new one? Have advice on how to deal with an insurer, repair shop or salvage yard? Tell us about it in the comments section below!
*image courtesy of orangesky3 on flickr.com