What Is a Total Loss after a Car Accident?

Posted on: December 1, 2021

After a car accident, car owners may worry that the damage to their vehicle will make it unsalvageable, at least in the eyes of the insurance company. When this happens, the insurance payout is called a total loss.

An insurance company may determine that a car accident calls for a total loss payout when the overall value of the car is less than the cost of making repairs to get the car back to an acceptable condition. The insurance policy obligates the insurance provider to cover the cost of repairs up to the value of the car, where policy limits are not a factor.

When the projected cost of repairs that would address the cars damage exceed the value of the car, the insurance company can legally determine that it will essentially buy the car for its estimated value.

Unfortunately, this may leave the car owner with a check that may not be enough to buy a new car, or even pay off the loan that may still stand on the car that was damaged in the accident.

How Is the Value of a Car Determined after a Total Loss Accident?

Car insurance companies rely on the fair market value of cars to determine what amounts for certain vehicles would call for a total loss payout. They identify the fair market value by consulting Kelley Blue Book, a car industry guide that lists the value of every car on the market based on its make, model, year, condition, mileage, and accident history.

Another source that is used for the same purpose is produced by The National Automobile Dealers Association (NADA).

Although the base value for a certain vehicle will almost certainly be influenced by these sources, there may be some wiggle room regarding what constitutes good condition versus fair condition, among other possible variables.

What if I Disagree with the Assessment of My Car’s Total Value?

If you find the settlement offer for a total value payout for your car to be less than the fair market value you deserve, you can choose to make a counteroffer to settle for a higher amount. If you do this, you should come armed with research that you have done to support your case for a higher payout.

Some factors that may increase the value over the assessments listed in the industry guides may include any upgrades, aftermarket accessories, or enhancements that you added to the vehicle. If you can provide evidence that you made these upgrades, you may be able to make the case for an increased settlement.

If the disagreement cannot be settled with negotiations, you may be forced to take the insurance company to court to receive a fair amount for the damage to your vehicle.

What Can Be Done to Argue that the Suggested Settlement Is Insufficient?

Evidence that might support your case would include receipts for purchases made to enhance your vehicle and pictures that show the improvements you made that increased its value over the book value listed.

Enlisting the service of a professional automobile appraiser is the most reliable way to prove that your estimates are reasonable and acceptable.

What Happens if a Fair Settlement Amount Is More than the Policy Limit?

Insurance companies will not pay more for your car than the policy limit would cover. This means that if your car is worth $40,000 and the policy has a limit of $20,000 in property damage, you would only be able to collect up to $20,000 for the damage that affected your car, no matter whether the damage to the car amounted to more than the car is worth.

If you have additional insurance, for example, collision coverage, you may be able to collect additional insurance payments from that supplemental coverage. 

What if I Owe More on My Car than Would Be Covered under the Insurance Policy?

The amount you may owe on your vehicle plays no role in how much the insurance carrier is obligated to pay in a total loss payout. The payout is based on the value of the car at the time of the accident. The amount you borrowed to buy the car has no bearing on how much the car is worth or the terms of the insurance coverage. 

What Happens to My Car if It Is Declared a Total Loss?

If the insurance company pays you for the total value of your car, the insurer usually takes ownership of the car and sells it or its parts for whatever funds it can recover.

What Steps Are Involved in Settling a Total Loss after a Car Accident?

If the damage to your car after an accident means that the insurance provider will offer a total loss payout, the steps in the process will involve the following actions on your part:

  • Report the claim to the insurance company.
  • Allow the insurance company to evaluate the damage to the vehicle through an approved shop.
  • Research to determine the fair market value of your vehicle.
  • Negotiate, if necessary, with the insurance company to achieve a fair settlement.
  • Agree to a settlement only if you are happy with the terms.
  • Check the amount you still owe on your vehicle, and if you have gap insurance to cover any discrepancy between the insurance payout and the loan payoff.
  • Produce the vehicles title, which will be turned over to the insurance company as part of the total loss payout transaction.

Middletown Car Accident Lawyers at Mikita & Roccanova Represent People Hurt in Accidents

If you were hurt in a car accident that resulted in a total loss of your vehicle, you should be able to recover compensation from the person responsible for your collision. In addition to the fair value price of your vehicle, you should be able to collect damages for the injuries you suffered in the accident. The Middletown car accident lawyers at Mikita & Roccanova can help you understand your rights and pursue compensation for your losses. Call us at 732-705-3363 or contact us online today to schedule a free consultation. Located in Hazlet and Highland Park, New Jersey, we serve clients throughout Ocean County, Sussex County, Neptune, Middlesex County, and Pennsylvania.