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My Car is “Totaled.” (What Does That Mean?)

Published on September 24th, 2010

The term “totaled” comes from the insurance term “total loss.” Put simply, when the cost of repairing a damaged vehicle exceeds the cost (or a set percentage of the cost) of repairing the vehicle, it makes little financial sense to spend the money for repairs. The insurance company calls the vehicle a total loss, and gives you cash for the vehicle.

Many drivers are upset when an auto insurance company tells them their car is totaled. When we think of a totaled car we think of a mangled pile of steel. However, since the decision to total the car is based on the amount of money it will cost to fix the car, and the damage may not always be apparent, a car that still looks fixable (especially to an owner who can’t bear to part with it!) may actually be totaled.

In some states drivers have some recourse, and can work with the insurance company on determining what will happen to the vehicle. For instance, shopping around for better estimates from trusted body shops, as well as finding shops that will use non-manufacturer parts, may lower the cost of fixing the vehicle. Check out state websites and know your rights. But keep in mind, the insurance company is not only considering the cost of the repairs, but also the cost of your rental vehicle, towing, storage, and any other incidental expenses associated with a lengthy and complicated repair. You may also choose to keep the totaled vehicle if you are hopelessly attached (is it your property), but the insurance company will not be able to get paid by the salvage yard, and this may affect your payout. Keeping a totaled vehicle, moreover, is not usually in your interest (unless you like the look of beehive and weed infested steel on your lawn).

If your vehicle ends up totaled, despite your efforts to work with your insurance company, you will be given the “actual cash value” of the vehicle, based on an appraiser’s estimate. The appraiser has to consider the condition of the car before the accident, so unfortunately the “actual cash value” is probably not going to buy you a new car.

Totaled vehicles are not good for the driver, and not good for the insurance company. So drive safe and avoid accidents!

If your vehicle has been totaled in an accident, it is important that you take the following steps following the accident in order to salvage the unfortunate situation as best as you can.

Your response to an accident

Following a total loss accident, both you and your insurer have options, but before explaining these, you should know the things to do after your accident.

  • Clean out your car. Be sure to remove all personal belongings and papers from the vehicle.
  • Report the accident and file your claim immediately. A total loss claim can sometimes take weeks to complete, and the sooner you file your claim, the sooner the insurer can begin working on it. Don’t procrastinate!
  • Have the vehicle towed to the insurer’s preferred repair shop. If you think there’s a good chance the car has been totaled, have it towed to a body shop preferred by the insurance company. Many companies have shops they work with, and you may speed up the claims process by using one of their shops. You can have your car towed to the tow company’s lot, but they’ll probably charge a storage fee. The preferred shop will usually hold your car without this fee.
  • Locate your title. This is no time for your title to go missing. If your car is a total loss, you’ll have to sign the title over to the insurance company. If you can’t find it or you’ve lost it, you’ll have to file for a lost title at the DMV, slowing up the claims process.
  • Review your car loan. Knowing the balance on your car loan can prepare you in case the outstanding loan is greater than the current value of your car. Insurance loss claims are not paid out on the basis of what you still owe but on the current value of the vehicle.

    One form of protection against this situation is to purchase what is called gap insurance. This pays the difference between what your car is worth currently and the amount you still owe on your loan.

    A rule of thumb for gap insurance: If you are less than halfway through the term of your loan – say two years on a five-year loan – having gap insurance is probably a good idea.

  • Do your research. This is not a requirement, but doing research at websites like Kelley Blue Book (kbb.com) will help you determine if the payout offered by your insurer is reasonable. Also, if you’ve made any recent major upgrades, it’s a good idea to collect the receipts as the improvements may be a factor in your final payout.
  • Fill out all required paperwork quickly. Total loss situations often require a lot of paperwork, and finishing it as quickly as possible helps to speed the process. If you have an outstanding loan on the car you’ll probably need a signed, notarized power of attorney transferring ownership to the insurer once the loan is paid off. Be sure to sign your name exactly as it appears on the car’s title.

The insurer’s options

In a total loss situation, your insurer can choose whether to replace your car or reimburse you with a check. If they offer a replacement, it must be a make and model comparable to your totaled vehicle, and the condition must be as good as or better than your car was before the accident. The insurer must also buy from a legitimate dealer, and if it’s not more than three-years-old, provide a warranty.

Your options

  • You can reject the replacement vehicle offered by your insurer, and the company can then settle the claim by paying you the price, including taxes and transfer fees, it would have paid for the replacement.
  • If within 30 days of receiving a cash settlement you find a replacement that costs more than the settlement, your insurer must either pay to cover the difference, find a cheaper car or negotiate a lower price.

    This requirement does not apply, however, if your settlement was based on the price of a replacement car you refused to accept.

Keeping your totaled vehicle

If for some reason you want to keep your totaled vehicle, that’s difficult to do under Illinois law.

  • To discourage “chop shops” – criminal operations that break cars down for their parts – Illinois law says if your totaled vehicle is less than 9-years-old you must turn it over to the insurer with the title.
  • If the totaled vehicle is 9 years or older, you may keep it. However, it becomes a “salvage vehicle,” and these cannot be legally driven on Illinois roads.
  • On the other hand, if your totaled vehicle has only sustained extensive hail damage but is otherwise drivable, your insurer may allow you to keep it.
  • Hopefully, you’ll find this summation of a complicated topic helpful, and for an instant auto insurance quote we hope you’ll contact Accurate Insurance today.

    This article is brought to you by Accurate Auto Insurance, where even less-than-perfect drivers get the lowest auto insurance quotes every day.

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