A totaled car feels like the final blow after an accident. Suddenly, you're without transportation and facing a confusing insurance process. A car accident lawyer can help you understand your rights, negotiate with the insurer, and pursue the compensation you need for a replacement vehicle. Learn below about the total loss settlement process and how to handle the insurance company after your car is declared a total loss.
Understanding the Total Loss Declaration
An insurance company declares a car a total loss when the cost to repair it plus its potential scrap value meets or exceeds its value before the accident. This pre-accident value is called the Actual Cash Value (ACV).
Each state and insurance company has a specific threshold, often a percentage of the ACV, to determine if a car is totaled. The insurance adjuster inspects the damage to estimate repair costs.
They compare this estimate to the car's ACV. If repairs are too expensive according to their formula, they label the vehicle a total loss.
This total loss declaration starts a specific claim process, which is different from just getting repairs done. It involves valuing your totaled car and arranging a settlement.
What Is Actual Cash Value (ACV)?
Actual Cash Value, or ACV, is the amount your vehicle was worth just before the accident, not the cost of a brand-new car or what you paid for it originally. ACV considers your car's make, model, year, mileage, overall condition, and recent sale prices for similar vehicles in your local market. Insurance companies use valuation guides and market research to calculate ACV, which becomes the starting point for your total loss settlement offer. You don't have to accept the first ACV figure; a car accident lawyer can guide you on your car’s ACV and how to respond to insurers.6 Steps To Take After Your Car Is Declared a Total Loss
Dealing with a total loss car involves several steps, and staying organized helps make the process smoother. Here's what usually happens:- Review the Insurance Company's Assessment: Carefully read the adjuster's report and the valuation documents to learn how they calculated the repair costs and the ACV for your totaled vehicle. Note any discrepancies or items you disagree with, and contact a car crash attorney for guidance.
- Gather Your Own Documentation: Collect all records related to your car, including the bill of sale, maintenance records, receipts for recent repairs or upgrades (like new tires or a sound system), and the original window sticker if you have it. This information supports your car's condition and value before the accident.
- Settlement Offer: The insurer will present a settlement offer based on the ACV, minus any deductible you owe (if the claim is through your own collision or comprehensive coverage). Review the offer details carefully. It should list the ACV, sales tax, and title/registration fees they might include.
- Remove Personal Belongings: If you accept the ACV offer, remove everything that belongs to you, including items in the glove box and trunk, and any aftermarket equipment you installed that isn't permanently attached. Check under seats and in all compartments.
- Handle the Title Transfer: If you accept the settlement, you'll need to sign the vehicle title over to the insurance company. They typically guide you through this paperwork. Without the title, they can't finalize the total loss settlement.
- Cancel Insurance and Return Plates: Once the settlement is complete and the insurer takes possession of the totaled car, contact your insurance agent to remove the vehicle from your policy. You must also follow your state's DMV rules for returning or transferring the license plates.
Calculating Your Total Loss Settlement
The settlement amount is the core of a total loss claim. The insurer should provide a report showing how it reached the ACV figure, often using third-party valuation services like CCC Information Services or Mitchell. Factors that influence the final settlement amount include:- Actual Cash Value (ACV): The baseline value of your car pre-accident.
- Sales Tax: Many states require insurers to include sales tax in the settlement, allowing you to buy a replacement vehicle without paying tax out of pocket.
- Title and Registration Fees: Some states also require insurers to cover the costs of titling and registering a replacement vehicle.
- Deductible: If you're using your own insurance (collision or comprehensive), your deductible amount is subtracted from the settlement. You don't pay a deductible if the claim is paid entirely by the at-fault driver's insurance.
Negotiating the Settlement Offer
You don't have to accept the insurance company's initial settlement offer for your totaled car. If you think the ACV is too low, you can negotiate, or let your lawyer do it. Successful negotiation requires preparation and evidence. An attorney independently investigates your car's value using pricing guides like Kelley Blue Book (KBB), NADA Guides, and Edmunds. They look for private party sale values in your local area, not just trade-in values. Experienced lawyers present your findings clearly to the adjuster. If direct negotiation fails, some insurance policies include an appraisal clause. This allows you and the insurer to each hire an independent appraiser. The appraisers then try to agree on a value or select a neutral third umpire to make a final decision.Dealing With a Loan or Lease on a Totaled Car
Having an outstanding loan or lease complicates a total loss situation. The insurance settlement check goes towards paying off the lender first. Usually, the insurer pays the lienholder directly after you provide the loan account information. What happens next depends on whether the settlement covers the full loan balance. If the ACV settlement is more than what you owe, the lender receives their payoff, and the remaining money comes to you. You can use this equity to purchase a replacement vehicle. However, you might owe more on the loan than the car's ACV, known as "negative equity." The insurance payout satisfies part of the loan, but you're still responsible for the remaining balance owed to the lender.What Is GAP Insurance?
This shortfall is where GAP (Guaranteed Asset Protection) insurance helps. GAP is coverage you might purchase from the dealership, your lender, or sometimes your auto insurer when you first buy or lease your car. It covers the difference—the gap—between the ACV settlement and the amount you still owe on your loan or lease. If you have GAP coverage, submit a claim with your GAP provider after the primary insurance settlement is finalized. They typically require copies of the total loss determination, the ACV settlement, and the loan payoff statement. The GAP payment goes directly to your lender to clear the remaining loan balance. Without GAP insurance, you must pay the difference between the total loss insurance settlement and your loan balance out of your own pocket. You still have to pay off the loan even though you no longer have the car.Keeping Your Totaled Car
Sometimes, you might want to keep your car even after the insurance company declares it a total loss. You may consider this if the damage is mostly cosmetic, if you want to repair it yourself, or if you want to sell it for parts. If you choose to keep the car, the insurance company still pays you the ACV settlement. However, they subtract the car's salvage value from the payment, which is the amount the insurer estimates they could get by selling the wrecked car at auction. Keeping a totaled car means getting a salvage title, which permanently marks the car's record, indicating it was previously declared a total loss. A salvage title significantly reduces the vehicle's resale value and makes it harder to insure. Before you can legally drive the car again, you must repair it to meet state safety standards. It then needs to pass a specific salvage vehicle inspection. Only after passing inspection can you apply for a rebuilt title, which allows you to register and insure the car, although potentially with limitations or higher premiums.How a Lawyer Helps With Your Total Loss Claim
While some total loss claims are handled directly between the owner and the insurer, legal help is beneficial. A car accident lawyer understands insurance tactics and protects your rights. They work to get you a fair settlement for your totaled vehicle.