August 13, 2011

How Total Loss Car Insurance Claims Are Determined

One of the questions that often arises in the wake of a damaging automobile accident is whether or not the vehicle involved in the accident can have a total loss claim made on it. This is a type of car insurance claim where the car is written off as a total loss. Often the car is referred to as "totaled", even if it is not completely destroyed and non-drivable.

In order for your car to be considered a total loss, it has to fall into one of two categories. It either has to be so damaged that it cannot be repaired at all, or it has to have a worth that is valued at less than the total cost it would be to repair it.

For example, if your car was worth $5,000, but the total cost of repairs on the vehicle amounted to $6,000, then your insurance company would consider the vehicle to be a total loss. It would not be worth it for them to pay for the repairs when the car is not worth that amount.

However, you would not have a total loss claim if your car was worth $5,000 and the cost to repair it was $4,000. In this case, your car insurance claims would pay for the repair of your automobile.

In order to determine how much your vehicle is worth, different insurance companies use varying methods. It is generally considered to be "fair value", which means what someone could consider to be a fair market value for the car. Insurance companies do not necessarily rely on Blue Book estimates to determine fair value. Most insurance companies use their own value estimates.

There is also some gray area as far as if the car will be repairable or not. Most cars can be repaired, even with severe damage, but again it may not be cost-effective. If so many parts have to be replaced as to almost make it an entirely different car, then chances are that you will have a total loss claim because the cost to repair it, as well as the labor, will be so untenable that it will be considered a total loss.

In some cases, insurance companies factor in the salvage value to your claim. The salvage value is how much money you would get by trading your car in somewhere for salvage. When a car is salvaged, it is sold for its various parts - the car is stripped down and each individual part is then sold for a profit.

Keep these factors in mind when you are wondering whether to consider your accident-damaged vehicle a total loss or not - they will help you determine this.