How Do Insurance Companies Determine a Total Loss for your Vehicle?
How Do Insurance Companies Determine a Total Loss for your Vehicle?

If your vehicle sustained serious damage in a car accident, you may be faced with the possibility that your insurance company will declare the vehicle a total loss. Once you file a claim with your insurance company, they will send an adjuster to assess the damage to your car. In general, your car will be totaled if the cost of repairs exceeds the current value of the car.

Each state has established thresholds which govern when a vehicle is considered a total loss. This threshold specifies a percentage of your car’s pre-accident value which must be exceeded in order to declare a total loss. Fortunately, Colorado thresholds require the damage to equal 100% of the current value of the car for it to be totaled. In some states, this threshold can be as low a 51% of the car’s value.

The current actual cash value of your vehicle is determined by a number of factors, including:

  • The age of the vehicle
  • The condition of the vehicle before the accident
  • Market value of your specific year, make and model
  • Resale value of similar vehicles in your area
  • The mileage on your vehicle

Once the vehicle’s actual cash value has been determined, it will usually be a numbers game to figure out whether it will cost the insurance company more money to pay for repairs or pay you for the value of the car. In most instances, the amount of money the insurance company will recoup from selling the car at a salvage auction will be factored into this equation as well.

If your vehicle is declared a total loss, your options may vary based on the specifics of your situation.

How Much Will I Receive for My Totaled Vehicle

The amount of money you’ll receive will depend on several factors, including:

  • The cause of the accident
  • Whether your state has no-fault laws governing car accidents (Colorado is a fault state, which means the at-fault driver’s insurance pays for the costs of repairs)
  • The terms of your insurance policy (or the at-fault driver’s policy if you didn’t cause the accident)
  • The amount of your deductible

You’re only entitled to recover damages up to the policy limits of the insurance coverage. For example, if the at-fault driver only carries $5,000 in property damage coverage and the value of your totaled vehicle is $8,000, the other driver’s insurance will only pay $5,000 towards the replacement vehicle. In order to recoup the remaining $3,000, you’ll either need to carry uninsured/underinsured motorist coverage or collision coverage on your insurance policy.

If the accident is determined to be your fault, the amount you recover will be dictated by the coverage you selected on your policy. If you have collision insurance, you’ll be able to recoup the value of the vehicle up to the limits of your coverage, minus the deductible. If your collision policy pays up to $10,000 and you have a $1,000 deductible, the maximum payout you can receive is $9,000 even if the value of the vehicle exceeds this amount. If you don’t have collision coverage, you may not be able to recoup any money for the cost of your totaled vehicle.

In Colorado, harsh weather can also cause serious damage to vehicles. It’s common for vehicles to be totaled due to extensive hail damage. In these situations, you will need to have comprehensive insurance on your policy in order to recoup the value of your vehicle. Your payout will also be dictated by the limits of your coverage and your deductible.

What Happens if I Owe More Money than the Value of My Vehicle?

The insurance company will only pay you for the actual cash value of the totaled vehicle, minus your deductible. If you still owe money on a car loan, it’s possible that this payout won’t completely cover the remaining value of the loan. In this situation, your insurance check will usually go to the lender to pay off as much of the loan as possible. After that, you will be responsible for paying off the remaining balance out of pocket.

Can I Dispute the Insurance Company’s Valuation of My Vehicle?

If you think the insurance company is undervaluing your vehicle, you have the right to dispute their assessment. However, it is usually challenging to prove the vehicle is worth more than the insurance company’s estimate. There are two ways to prove your argument:

  • Provide evidence as to the actual condition of the car – If you’ve made upgrades to the vehicle or kept it in pristine condition, it may drive up the actual cash value of your vehicle. You’ll need receipts for any upgrades performed and photos of the condition of your car to prove it’s worth more than the insurance company initially determined.
  • Hire an appraiser – You can work with a qualified appraiser who will provide an opinion as to your vehicle’s actual value. If the appraiser determines the car is worth more than your insurance company’s estimate, you may have grounds to dispute the settlement offer.

If you’re unable to reach a satisfactory settlement agreement with your insurance company, you have the following options:

  • Arbitration – A neutral third party, called an arbitrator, will determine the value of the vehicle based on the facts presented by you and your insurance company. Arbitration can either be non-binding (you still have the option to pursue litigation if you’re not satisfied with the outcome) or binding (the arbitrator’s decision is final).
  • Litigation – You have the option to have your dispute resolved in court. However, this should always remain a last resort option.

Always consider the costs associated with disputing the value of your vehicle before moving forward. You’ll need to pay for an appraiser in all situations. If you choose arbitration or litigation, you’ll want to have an attorney represent you. When you go to court, there will also be additional fees associated with your case. Often, these expenses will exceed the extra money you’re able to recoup from the process.

Can I Keep a Totaled Vehicle?

In Colorado, you’re legally entitled to keep a totaled car. However, you’re required by law to complete all repairs necessary to restore it to good working condition, and you need to get a Rebuilt Title Established by Salvage certificate for the vehicle before you can drive it.

If you would like to keep your totaled vehicle, you should inform the insurance adjuster of your intentions right away. In this situation, you’ll be entitled to recover the actual cash value of the car, minus the deductible and the amount your insurance company would receive at a salvage yard auction. You’ll then be responsible for arranging for all repairs and paying for them yourself.

When Should I Consider Keeping My Totaled Vehicle?

The decision to keep a salvaged car shouldn’t be made lightly. There are many factors to consider. The most important is safety. If the vehicle contains structural damage that cannot be safely repaired, you should never keep the vehicle. However, there are many instances where making the necessary repairs will restore the vehicle to safe working order. This is especially true if the damage is mostly cosmetic, such as after a hail storm.

If your vehicle can be safely driven after making repairs, the other factors to consider are largely financial:

  • Cost of the repairs – If you’re going to spend more money on repairs than you’ll receive from the insurance company, keeping the vehicle generally isn’t a smart financial decision.
  • Age of the vehicle – Is this an old vehicle that would need to be replaced soon? If so, it’s probably best to let it go now. If it’s a newer vehicle, is your goal to keep it for years in order to avoid car payments? In this situation, paying a little money out of pocket may be worthwhile if it will save you thousands of dollars in car payments over the next several years.
  • Remaining car payments – If you still owe money on a car loan, will the insurance check cover the balance of the loan? If so and you’re ok with making payments on a new car, giving up the vehicle is likely the best option. If your insurance check won’t pay off the loan, you may want to consider keeping the vehicle depending on how much you’d owe the bank to cover the difference.
  • Your financial situation – Can you afford to purchase another vehicle that will adequately meet your needs? This should be factored into your decision to keep the vehicle.

Keep in mind that not all insurance companies will offer you a policy on a totaled vehicle. You should always inquire with several insurance companies, including your own, regarding your ability to insure a salvaged vehicle before you decide whether to keep the car.

Can I Buy My Vehicle at Auction?

In most instances, buying your vehicle at the salvage yard auction isn’t a viable option. In most instances, you’ll need a special license to attend the auction. These licenses are usually reserved for auto dealers and auto salvagers. Make sure you check with the auction house to find out if you are able to bid on your car before assuming you can do so.

Accurate Auto Body Can Help

If your vehicle is totaled by the insurance company, Accurate Auto Body shop and collision repair can help you arrive at the right decision. We offer customized auto repair consulting services that will:

  • Inform you of your options
  • Recommend the ideal solution to pursue
  • Answer all of your questions
  • Devise a personal repair plan if you decide to keep the vehicle
  • Assist you with the claims filing

When you work with Accurate Auto Body, you’ll benefit from our Focus on You Service System™, which ensures:

  • You’re treated with respect throughout the entire process
  • Your schedule is accommodated when repairs are made
  • You’re provided with guaranteed pricing and completion dates
  • Your vehicle will be fixed right the first time

Please contact us today to discuss your repair options. We offer collision repair services in Aurora, Denver, and the surrounding areas of Colorado.

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