If you have ever experienced in a total loss of your car, it can be overwhelming. Even experienced drivers can feel panicked when their vehicle is declared a total loss after an accident. Beyond the concerns of injuries and safety, you might have questions about your next steps and the insurance process.
At Vargas & Vargas Insurance, we understand that the aftermath of a car accident is a confusing and uncertain time. Finding out that your car is considered a total loss and won’t be repaired only adds to the stress.
Understanding what “total loss” means and how insurance companies determine it is just one of the many inquiries we receive from clients filing accident claims. We’re here to provide clarity during this challenging period, explaining total loss, how your insurance policy covers it, and the steps you should take afterward.
In this post, we’ll break down when a car is considered a total loss, which coverages come into play, and the necessary actions you should take after experiencing a total loss.
When does a car qualify as a total loss?
If your car sustains significant damage in an accident, your insurance company might label it a total loss. This happens when repairs become impractical or when the vehicle remains unsafe even after fixing it.
Generally, if repair costs surpass your car’s actual cash value, it’s declared a total loss. Instead of repair expenses, you’ll receive compensation based on the car’s value.
Insurers often take possession of totaled vehicles. Ensure you transfer the title, cancel the license plates, and remove the car from your insurance policy to avoid unnecessary charges.
How do insurance companies decide if a car is a total loss?
Your insurance companies assess if a car is a total loss only after conducting their own inspection of the vehicle’s damages.
Most Massachusetts insurance companies employ the total loss formula (TLF) to decide on total loss status. If the cost of repairs plus the salvage value equals or exceeds the car’s actual cash value, it’s declared a total loss.
Keep in mind that variations exist due to your insurer and unique circumstances, so it’s wise to consult your insurance provider about this process.
How is the actual cash value calculate?
The actual cash value (ACV) reflects your car’s present market worth. Insurers calculate it by subtracting depreciation from the initial purchase price.
It’s important to distinguish ACV from replacement cost. Replacement cost provides the full value of a new vehicle without considering depreciation. However, this coverage is usually limited or comes with higher premiums compared to ACV.
Which insurance coverages deal with totaled vehicles?
If another driver is responsible for an accident that totals your car, their insurance policy will cover your vehicle’s actual cash value.
When you’re at fault for the accident, or if the other driver leaves the scene or lacks insurance, you need to file a claim under the appropriate coverage on your policy to get compensation for your car’s ACV.
The specific coverage you should use depends on the accident scenario:
- Collision Coverage:
- Handles damages caused by colliding with vehicles or objects.
- If you’re at fault for the accident, your ACV reimbursement comes through collision coverage.
- Recommended for all drivers but not mandatory in Massachusetts if you own your vehicle outright.
- Comprehensive Coverage:
- Addresses damages from non-collision incidents like theft, vandalism, weather, and animal collisions.
- If a non-collision event results in your car being totaled, the comprehensive coverage is used.
- Similar to collision coverage, it’s not required if you own your vehicle and don’t have a loan.
- Uninsured/Underinsured Motorist Coverage:
- Required in Massachusetts.
- If you’re in an accident with an uninsured or hit-and-run driver, this coverage reimburses your car’s ACV.
It’s important to understand which coverage to use based on your accident scenario. If you’re unsure, consult your insurance provider to ensure you’re properly covered.
What happens if I still have a loan on my vehicle?
What if the money you receive for your totaled vehicle doesn’t cover your outstanding loans? This is where GAP insurance comes in. GAP insurance, or “guaranteed asset protection,” fills the gap between the actual cash value you’re reimbursed for your vehicle and the amount you owe on your loan or lease. Remember, GAP insurance is not included by default – you need to add it to your policy through an endorsement if you’re eligible.
How Much Does GAP Coverage cost?
Adding GAP insurance to your Massachusetts auto insurance will typically cost an additional $25 to $75 per year. If you get this coverage through the dealership or finance company, the cost will vary based on factors like the car’s MSRP, loan duration, financed amount, and APR, generally ranging from $500 to $750.
It’s important to note that many dealers and finance companies might attempt to include GAP insurance in your monthly loan or lease payment by default. Therefore, it’s crucial to inquire about this and clarify before finalizing your paperwork.
What steps should I take if my vehicle is declared a total loss?
Here’s what to do if your vehicle is totaled:
- File a claim: Contact your insurance agent or provider right away to start the process. Total loss claims are filed like any other claim on your auto policy.
- Tow your vehicle: Arrange to have your car towed to an auto body shop since you likely can’t drive it anymore.
- Gather documents: Be proactive and collect documents your insurer will need, such as the car’s title and sales receipt. If leased or financed, your lender/lessor will provide the title.
- Research car’s value: Look up your car’s current value to get an idea of the reimbursement you might receive.
- Check loan status: If you have a loan or lease, inform your lender/lessor about the damages and the upcoming settlement.
- Shop for a new car: You may not get the same car, but you can use the reimbursement for a down payment on a new vehicle.
Pro-Tip
Before you do anything, document the condition of your car with photos and notes. This evidence can support your insurance claim and ensure you get the compensation you deserve. Remember, thorough documentation can make a significant difference in a total loss scenario. Stay prepared, stay protected!
Your Local Independent Insurance Broker
Totaling your car can be unsettling, but being prepared is key. Understand what triggers a total loss and how your insurance covers it. This knowledge lets you know exactly what to do if your car is ever totaled.
For over four decades, Vargas & Vargas Insurance has been assisting individuals, families, and businesses. We’re here to address your questions and find the best coverage at the most competitive rates. Reach out to us at 617-298-0655.
