Car Insurance Wants to Total My Car: What Are the Options?
When you get into a car accident, you're might be saddened to find out that your insurance company wants to total your car out.
The insurer may refer to this as a “total loss.”
Typically, a total loss means that the cost to fix the car is more than what the car is worth. This is not uncommon for older cars or for car models that don’t tend to hold their value very well.
In this situation:
You might think that your only option is to accept the insurance company’s decision to total your car.
You should know that if this happens, there are few things you can do to avoid losing your car or owing money to your bank or finance company when your car is totaled.
The Insurance Claims Process
When you get into an accident, you’ll start the claims process with your insurance company who will typically send out a claims adjuster to examine the damage.
The claims adjuster will consider various factors when trying to determine if your car should be totaled or not.
- year of your car
- other variables
This information will help them figure out what your car is worth. They will also assess the damage to your car along with the cost to repair it.
If the repairs exceed the value of the car, your insurer will likely want to total the car.
If you’ve got comprehensive coverage or collision coverage, your insurance will give you a check for the actual cash value (ACV) of the car.
Your deductible will usually be taken out of this check, so don’t be alarmed if the payout seems lower than you expected.
Total Loss and Cash Value
Whether or not your insurance company will total your car will depend on the state you live in as well as your insurer.
Individual states and insurance companies have their own formulas for determining if a car will be totaled.
There are 22 states that use a total loss formula (TLF) to figure out if your car will be totaled. With TLF states, the insurance company calculates the cost of repairs for the damaged vehicle along with the scrap value of the vehicle.
The scrap value is what the salvage yard would pay for your out-of-commission vehicle.
If this amount is greater than the ACV of the car before the accident, the car will be totaled. If that amount is less than the ACV of your car, the insurance company could decide to repair it.
In the rest of the states, insurers use a Total Loss Threshold (TLT.)
With the TLT formula, the damage just needs to exceed a percentage of a car’s value for the insurance company to consider it a total loss.
In some states, the TLT maybe be just 50% whereas in others it could be up to 100%. The most common TLT for many states is 75%.
What Can I Do If My Car is Totaled?
1. Pad your savings for a new car
If you don’t want to be negatively impacted if your car is totaled, the best thing would be to plan ahead before you actually have an accident.
The older your car is, the more you are at risk for your car being totaled in an accident. The repairs will typically exceed the value of the car in most cases.
With this higher risk, it might be wise to begin putting money aside to cover the cost of another vehicle in case of an accident where the insurance company wants to total your car out.
You could use the money you save up along with the check you’ll receive to help you purchase a new car as needed.
2. Get gap insurance
If your car is financed, you might be surprised to know that the ACV of your car could be substantially less than the balance you owe on the car.
This can be a difficult situation because you will be responsible for making sure the balance on your totaled car is satisfied.
If you want to avoid this situation, being proactive will help as well. You can get what is called gap insurance to cover the difference between the ACV and what you owe on your car.
This type of car insurance is not usually included by default in your auto coverage, so it’s something you will have to ask your insurance company about.
It may not be available for every situation, but it’s worth checking into.
3. Appeal the decision
If you haven’t been saving up money for a new car or if you haven’t purchased gap insurance for your car, having your car totaled could present big challenges for you.
You may be out of a vehicle or be responsible for paying the balance of your auto loan or both!
Just because your insurance company decides to total your car doesn’t mean you have to accept it as final.
There are a few things you can do to dispute the decision.
Show the repair cost
First, you can try to prove that the cost of the repairs will be less than the claim adjuster's estimate.
You could ask for another claim adjuster or you can do some additional research on your end by getting other repair estimates. This might seem like a lot of work but the time you spend doing this could save your car from being totaled.
Dispute the car values
Second, you may be able to dispute figures like the actual cash value (ACV) of the car or even the car’s scrap value.
Though you are not very likely to be successful in this endeavor, you could present extenuating evidence that the value of the car is higher than estimated for some reason.
It might be in really good condition or have extremely low mileage for the year it was made. You may even be able to get estimates from different salvage yards for your vehicle, too.
If you are successful at getting enough evidence and disputing the decision, you may be able to convince the insurance company to repair your car instead of totaling it.
This could save you tons of money and headaches in the long run.
4. Keep your car
Another option you have is keeping your car.
You may decide to keep the car to do your own repairs or you may want to sell it for parts to a salvage yard. In this case, the insurance company will pay you for the ACV, less your deductible and the scrap value of the car.
If you decide you will keep your car, just know that the title of the car will be marked as “salvage.” At this point, you are free to sell the car to a junkyard or do the repairs on the vehicle yourself.
In the case of doing the repairs on your own, you should get several estimates from experienced mechanics.
You’ll want to make sure that the car can be repaired at a reasonable cost while maintaining the integrity of the car’s safety systems. It would not be worth it to save a little money in exchange for a car that is not safe to drive.
You should also know that once the repairs are complete, you’ll have to get an inspection so that the car’s title will be changed from “salvage” to “rebuilt.”
You could have difficulty finding an insurance company to insure a car with a rebuilt title.
Finally, if the car is financed and you still owe a balance on it, you technically don’t own the car and cannot make the decision to keep it.
The bank or finance company will determine whether or not you can keep the car in the end.
Making the decision
If after seeing all these options, you are still not sure what to do, the best thing would be to figure out the pros and cons of either letting your insurer total your car, appealing their decision or trying to keep and repair your own car.
In the end, it comes down to your individual circumstances.
If you have the time and energy to appeal your insurer’s decision to total your car and would experience major difficulties without a car, then this option might be worth pursuing.
In the case of keeping and repairing your car, this can be a pretty extensive undertaking.
If you are a mechanic or have some other way to get really inexpensive parts and repair work done on the car.
You’d also need the time and resources to deal with the title issues and find an insurer that will provide coverage for the rebuilt car.
If, alas, you really cannot appeal the decision or it doesn’t make sense to keep and repair your car, then you might just have to accept the insurance company’s decision to total the car.
Either way, it’s important to know that you have options if this ever happens to you.