August 19, 2016

What The Salvage Value Of A Vehicle Is And What It Means For Insurance Claims

Car insurance rates can increase after an accident for a number of reasons. They may do so because the insurance company has decided that you are entirely or partially at fault or because you are living in a no fault state that prohibits seeking damages from another insurance company. Sadly, car insurance rates can increase even in situations where a car is so badly damaged that the insurance company chooses not to repair it. In these cases, the company will declare your car a “total loss” and give you an amount of money based on the current value of the vehicle. This can be difficult for drivers to accept, as they often believe that their vehicle could be repaired, but it is the insurance company that makes the final call. One element involved in the determination of car insurance rates and payouts after a car accident are the salvage value of the vehicle.

The salvage value of the vehicle is what an insurance company can get for your car by selling it to a junkyard or parts dealer. They will be unable to do this until you choose to sign your car over to them, but without this consent, they will not process a claim. The amount that the salvage yard gives the company will offset the amount that they have to pay you, and can help to lessen the impact of an accident on a car insurance claim. It works like this – if you are in accident, you will call your insurance company, who will send out an adjustor to assess your vehicle. If they deem it to be a total loss, they will ask you to sign the vehicle over to them. They will then give you a settlement based on the value of the vehicle on the current marketplace, adjusted for how well you have taken care of it.

The vehicle will then be taken to a salvage yard and sold. If your insurance provider is going to pay you $5,000 and the junkyard buys the car for $1,000, then it is only a payout of $4,000 that the insurance company has to make. The greater the value of your car to the salvage yard, the smaller the amount of money the insurance company will have to pay, and the less chance that your insurance premiums will increase.

A vehicle declared a total loss can be extremely disheartening for a driver, and hearing that their insurance premiums will also rise can be devastating. Fortunately, a vehicle will salvageable parts can help to offset this increase in car insurance rates for drivers who have been involved in a serious collision.