Collisions created over $184 million in liability and property damage nationwide in 2019, a total that has risen consistently over the past several years. If you experience the car owner's nightmare of a vehicle damaged beyond reasonable hope of repair, your insurance company may need to write it off as totaled.
The processes, questions, and potential challenges involved in claiming a totaled vehicle will prove less daunting once you have a basic understanding of what to expect. Check out the answers to these frequently asked questions about totaled vehicle claims.
When (and Why) Do Insurance Companies Consider a Car Totaled?
A totaled car meets state requirements regarding its total loss threshold. This threshold is the percentage of the car's actual value versus repair costs and scrap value. In Colorado, insurance companies consider a car totaled after its estimated repair costs and scrap value equal 100 percent of its actual cash value.
A totaled car will often cost the insurance company less in claim compensation than the many thousands of dollars necessary for repair costs, especially on older cars that have lost substantial value. For instance, if your old Colorado truck worth $2,000 sustains $3,000 in damage, your carrier will likely only compensate you for $2,000.
What Kind of Auto Insurance Covers Totaled Cars?
To receive insurance compensation for a totaled car, you must carry comprehensive or collision insurance. Liability insurance covers only the amount you might owe another party for causing personal injury or property damage to that party.
If you currently finance or lease your car, your lender most likely insisted that you take out comprehensive and collision insurance at the time of that transaction. In any case, make sure that you have added these types of auto insurance to your policy so that if you total your car, you can file a claim.
How Do You File a Claim on a Totaled Vehicle?
You can’t usually proclaim your car a total loss; only the insurance company can usually make that formal determination. If the insurance company declares your car totaled, it will then cut you a check for the car's actual cash value based on industry standards and figures.
When you accept the claim check from your insurance company, the insurance has purchased the car from you. It will then change the clean title to a salvage title that represents the car's status as a severely damaged vehicle. If you still owe money on the vehicle, the insurance company will confer with your lender.
You may need to sign a power of attorney document as part of the claim process. This document gives the other institutions involved the legal right to transfer the car title from one owner to another. Even after you've lost the car, however, you need to keep making payments until you've paid off your loan or lease.
If you still have several years to go on a vehicle's repayment schedule, give serious thought to adding gap insurance to your current insurance coverage. This extra safeguard can take care of the difference between what you still owe on the car and the car's actual cash value.
What Can You Expect at the End of the Claim Process?
As soon as the insurance company has figured the actual cash value of your vehicle, it may only need a few days to issue a check for that amount. If you own the car outright, you'll receive the entire amount. If you still owe payment, the lender will receive the potion of the amount equal to your remaining debt.
If you bought your car just a few months before the event that totaled your car, your insurance company may offer a guaranteed replacement option. In this scenario, you'll receive a new car equivalent in value to the one you lost. If you don't own a brand-new car, you may pay extra for insurance that includes a car replacement option.
What Happens If You Decide to Keep Your Damaged Car?
If you have a special sentimental attachment to your car, you may decide that you cannot bear to give it up to the insurance company as a totaled vehicle, regardless of any replacement options. You may have the right to retain the vehicle as long as you switch the title status to a salvage title yourself.
In this situation, you would still receive a claim check from your insurance company. However, the insurance company will first determine the current fair market value from estimates by local salvage yards. It will then deduct this amount from whatever settlement check you finally receive.
Bear in mind that the somewhat uncertain value of a salvage-titled car can pose challenges if you want to get comprehensive or collision insurance for the rebuilt vehicle. You may need to content yourself with basic liability coverage.
L.A. Insurance can help you protect yourself financially against the prospect of a totaled vehicle. Contact our team to learn about our auto insurance options and request a free quote.