In the United States, as many as 6 million car accidents happen each year. That’s an average of about 16,438 car crashes in a day. If you happen to get into one, consider yourself lucky if you get out safely and the damage doesn’t total your car. This will allow you to get assistance from the auto repair shop, and claim insurance for the necessary bodywork.
What does it mean if your car is “totaled”?
“Totaled” is an abbreviation for ‘total loss’, and is a term used to describe a vehicle that (1) can no longer be repaired or (2) would cost more to repair than its worth. For example, if a car’s value is declared at $10,000 and it costs $14,000 to repair, it is no longer considered repairable. Instead, it will be declared ‘totaled’.
Once a car is deemed totaled, an insurance company may protect its assets and refuse to pay for its repairs. But if your policy covers it, the insurance company may owe you the cash value of your car, which is calculated based on the:
- Car make and model
- Age of the car
- Car condition
- Resale value of its metal and parts
- Presence of damage
- The reselling price of the vehicle in your local area
What happens if the car damage isn’t my fault?
When your car is “totaled” by an act of nature – such as a falling tree – and you have comprehensive coverage, your insurance company might reimburse you the actual cash value of your car, minus the deductible.
The actual cash value (ACV) of your car is the replacement cost minus its depreciation value. It is basically the amount you would normally expect to receive for the car, had you sold it in the marketplace.
This is different from the replacement cost value (RCV), which is equivalent to the cost of buying a brand new car. Some insurance companies may offer to cover your vehicle’s replacement cost, but not everyone does.
If your car is “totaled” by an accident caused by a different motorist, you will likely be covered by collision coverage. Under collision coverage, it’s up to the insurance company whether or not they will seek repayment from the involved party.
Will my insurance company pay for a totaled car?
If your car is on loan, you are required by law to have collision and comprehensive coverage. Collision insurance will help pay for the repairs or replacement of a totaled vehicle that was damaged by another car or object, such as a tree or a fence. Comprehensive insurance covers the repairs and replacement of a totaled vehicle, granted that the damage did not result from a collision accident.
Sometimes, an insurance company will refuse to pay for a totaled car. Common reasons where they might deny a claim include:
- Lack of appropriate coverage
- Failure to pay your premiums on time
- Driving under the influence at the time of the accident
- Damage wasn’t reported to the insurer
- Suspected fraudulent claim
But if you already paid off your car loan, and your vehicle is no longer covered by a collision or comprehensive insurance, expect to pay out of pocket.