January 2, 2010

The Process If Your Insurance Company Deems Your Vehicle A Total Loss

Vehicles can very quickly be reduced to nothing more than fused chunks of metal if a severe collision occurs. Even with an excellent auto insurance policy, a provider who is diligent and a competent repair shop at work, there are times when it is simply not possible to restore a vehicle to its original condition without spending substantially more money than the car is worth. In these instances, an insurance company will designate the car as a total loss vehicle.’

When a vehicle is deemed a total loss, it is usually for one of three reasons. The first is that the vehicle is damaged so badly that repairing it safely would be impossible. Second, the car might have been damaged to such an extent that the state’s vehicular legislation demands that it be declared a total loss. And, thirdly, the cost to repair the car might exceed its actual cash value. The actual cash value is determined by the insurance company by using a database of current and past car values, the mileage on the car before the accident, and what other (if any) pre-existing issues the car had. If the number arrived at by the insurance company for the actual cash value of the car is lower than the cost of repairs, the vehicle will be declared a total loss.

If an auto insurance claim has been made on an accident and the car is declared a total loss, the next step will be payment. This payment will be in the amount of the actual cash value of the car, minus any deductible owed by the policyholder. The car will then be taken by the insurance company and sold as salvage. If the vehicle is leased, the payout will go to the leasing company, and if the vehicle is financed, it will be paid to the financing institution. If the amount still owed on the vehicle is higher than the amount of the total loss payout, the owner will be responsible for paying the financing company the remaining balance.

After a vehicle has been declared a total loss, it is best for the owner to remove their name from the registration. The owner may also need to obtain a rental car, which may be included in the insurance company’s total loss coverage. It is important for the vehicle owner to remove the total loss vehicle from their coverage, but it is just as important to wait to do so until they are both removed from the registration of the vehicle and are no longer driving a rental car.

It’s good to know that if your car gets totaled, you have a good auto insurance policy to back you up.