After a serious accident, you may feel like you've been hit again when your insurance company declares your vehicle is a total loss, or "totaled." Instead of having your car repaired and back on the road, you may receive a cash settlement that seems inadequate.
Why has my car been declared a total loss?
There are several reasons why an insurance company may decide a vehicle is totaled. GEICO, for example, will declare a vehicle a total loss if it's so badly damaged that it can't be safely repaired, if the repair costs are higher than its actual cash value or if state regulations require them to do so because of the extent of the car's damage.
Insurers determine a car's actual cash value based on its age, mileage and general condition. Any unrepaired damage that took place before the accident will decrease a car's actual cash value, according to Edmunds.com. Car insurance companies use databases and reference sources like the National Association of Automobile Dealers or Kelley Blue Book to help determine what cars are worth in the current market.
Insurers also factor in the amount they would receive for salvaging your car. In other words, if it would cost more to repair your car than it would to sell it to a salvage yard and cut you a check for its actual cash value, chances are your car will be totaled.
What should I do if my insurer says my car is totaled?
When an insurer declares a car a total loss, it will offer a cash settlement based on the car's actual cash value, minus any policy deductibles that you have. Before you accept the settlement, however, you should do some research yourself. Use Kelly Blue Book, the National Association of Automobile Dealers guide and Edmunds' True Market Value appraiser to find out what your car is worth. You also can contact dealers for estimates. Armed with that information, you can appeal the insurer's settlement offer if you're not happy and then ask for an adjustment.
If you can't resolve your differences, you may have the right under your policy to get an independent appraisal.
Check with your state's insurance regulator to learn about your rights when your car is totaled. The California Department of Insurance, for example, offers an automobile claims mediation program that helps resolve disputes about total losses and other physical damage claims. There's no cost for consumers, but the amount of the claim must exceed $7,500, and the disputed difference between the policy holder and the insurer must be at least $2,000.
Want to keep your totaled car? Better check with your state's motor vehicle department. Many don't allow it because they want to keep unsafe cars off the road.