After an accident, car owners and their insurance companies make a determination of whether a vehicle is a total loss. This determination can be a source of conflict when a car owner wants the car to be totaled in order to avoid driving a repaired vehicle that was badly damaged and the resulting diminished value of the car. On the other hand, some owners may wish to avoid a total loss determination because the actual cash value that the insurance company agrees to may not be enough to purchase an acceptable replacement vehicle or for some other reason the owner wishes to continue driving the car.
Generally speaking, a car is considered a total loss when the cost to repair the vehicle exceeds the actual cash value of the car. However, as a practical matter, insurance companies usually determine that a car is totaled when the cost to repair it is a large percentage of the actual cash value because at that point the damage is extensive enough that it would be uneconomical to repair the vehicle.
There are a number of variables in this equation that should be considered when dealing with an insurance company regarding the total loss determination. First, insurance companies are able to recoup some of the value of a totaled vehicle by selling it as salvage and will add the salvage value to the cost to repair the car. If that figure exceeds the actual cash value then a car may be determined to be a total loss.
The salvage value of the car and the estimated cost to repair the vehicle should be considered in making a total loss determination. Repair estimates can vary widely depending on the body shop that provides the estimate, and insurance companies may consider the reality that supplemental repairs may be required beyond those listed in a preliminary estimate. Furthermore, the salvage value of a vehicle depends on a number of factors, including whether parts for that model car are in high demand, what parts are damaged, and whether the vehicle will be sold for scrap.
The actual cash value of a car is another area of contention in a total loss determination. Insurance companies do not always use the full Kelly Blue Book value of a car in making this valuation. They may consider other measurements of the value such as quotes from local dealerships, sales reports, valuation guides, or advertisements. There may also be a dispute as to the condition of the vehicle.
If a car is determined to be a total loss, the DMV and vehicle code impose a number of reporting and registration requirements on the owner and insurance companies involved. This may also affect the insurance payout on the vehicle. For example, if the car owner retains a totaled vehicle, the insurance company will decrease the payout by the salvage value of the vehicle.
The property damage component of a car accident can create a large amount of confusion, and a qualified attorney may be able to help in evaluating a potential claim.