Will my car be totaled?

Whether your car will be totaled depends on the extent of the damage and the cost of repairs compared to the car’s actual cash value (ACV). Here’s a detailed explanation to help you understand the factors that insurance companies consider when determining if a car is totaled

Key Factors Insurance Companies Consider

1. Actual Cash Value (ACV):

   • Definition: The ACV is the market value of your car at the time of the accident, considering depreciation, age, condition, and mileage.
   • Determination: Insurance companies use various methods to determine the ACV, including industry valuation guides like Kelley Blue Book, NADA, and their own proprietary databases.

2. Cost of Repairs:

   • Estimate: A repair shop or insurance adjuster will estimate the cost to repair your car. This includes parts, labor, and any other associated costs.
   • Threshold: If the repair costs approach or exceed a certain percentage of the car’s ACV, the car may be deemed a total loss. This percentage threshold varies by state and insurance company but typically ranges from 60% to 80%.

3. State-Specific Total Loss Thresholds (TLT):

   • Percentage-Based: Some states have specific laws that set a threshold percentage of the car’s ACV, above which the car must be declared a total loss. For example, in some states, if repair costs exceed 75% of the car’s ACV, it will be totaled.
   • Total Loss Formula (TLF): In states without a specific TLT, insurers use the TLF, which considers the ACV minus the salvage value (what the insurer can get by selling the damaged car) compared to repair costs.
     
     

Process to Determine if a Car is Totaled

1. Initial Assessment:

   • Inspection: After an accident, an insurance adjuster will inspect your car to assess the damage.
   • Estimates: The adjuster will get repair estimates from body shops.

2. Valuation:

   • Market Research: The insurance company will determine the ACV of your car using industry guides and market research.
   • Condition Factors: Factors such as the car’s age, mileage, previous accidents, and overall condition will affect its ACV.

3. Comparison:

   • Repair Costs vs. ACV: The estimated repair costs are compared to the car’s ACV.
   • Threshold Check: If the repair costs exceed the TLT or TLF threshold, the car is declared a total loss.
     
     

What Happens if Your Car is Totaled?

1. Payout:

   • Settlement Amount: If your car is totaled, the insurance company will pay you the ACV of the car, minus any applicable deductible.
   • Loan Balance: If you have an outstanding loan, the insurance payout will first go to the lender. If the payout is less than the loan balance, you will still owe the remaining amount unless you have gap insurance.

2. Salvage Options:

   • Salvage Title: If you want to keep your totaled car, you can negotiate to buy it back from the insurance company for its salvage value, but the car will have a salvage title, which can affect resale value and insurability.
   • Salvage Auction: Alternatively, the insurance company may sell the car at a salvage auction.
     
     

Example Scenario

Let’s say your car’s ACV is $10,000. The repair estimate is $7,500. If your state has a TLT of 70%, then:

• Calculation: 70% of $10,000 = $7,000.
• Comparison: Since the repair cost of $7,500 exceeds $7,000, your car would be considered a total loss.

Your car will be totaled if the cost of repairs exceeds a certain percentage of its ACV, which varies by state and insurance company. If totaled, the insurance company will pay you the ACV minus any deductibles, and you may have options regarding the salvage of the vehicle. Understanding these factors and how insurance companies assess damage can help you navigate the process more effectively.