Total Loss Basics in North Carolina
Car accidents are stressful, especially when your vehicle is not drivable after the accident. Moreover, if your car is deemed a total loss (“totaled”), you will likely acquire additional stress in finding a replacement vehicle and possibly paying off the remaining balance of any loan used to purchase the vehicle.
As a general rule, a vehicle will be deemed a total loss when the cost of repairs exceeds 75 percent of the actual cash value of the vehicle. Determining the actual cash value can be difficult, especially since most insurance companies use different methods when calculating these figures. This article should be used as an introduction to the concept of a total loss vehicle after a car accident.
When will my vehicle be deemed a total loss?
After you have been in an accident, your vehicle will likely be deemed a total loss if the cost of repairs will be greater than 75 percent of the actual cash value. For example, if you have a vehicle with an actual cash value (more on this number later) of $7,000, and the estimated cost of repairs after the accident is $6,400, then your vehicle will likely be deemed a total loss. This is due to the fact that the cost of repairs is about 91 percent of the actual cash value.
How much can I get for my total loss vehicle (i.e., how is it calculated)?
When your vehicle is deemed a total loss, you are able to be compensated for the actual cash value (ACV) of the vehicle. Again, determining the ACV figure can be tricky, as most insurance companies use different formulas or methods to calculate this number. More importantly, there is not a standardized method for calculating the ACV number. Essentially, the ACV of a vehicle is determined by finding the cost for a comparable replacement vehicle and making deductions from that number for factors like the age, mileage and condition of your total loss vehicle (replacement cost – age, mileage, condition, etc.). But this process can be tricky and complicated.
For example, let’s pretend that you are driving a 2010 Jeep Grand Cherokee that is in fair condition and has been driven 120,000 miles. You are in an accident and the Jeep is deemed a total loss. The insurance company will look at comparable vehicles for sale in the area (replacement cost) and then deduct the differences between the vehicles from that price. So, if the replacement cost is around $10,200, the insurance company will make deductions for differences in your vehicle. For instance, if the average mileage for a 2010 Jeep is 85,000 miles, the insurance company will likely deduct money from the $10,200 due to your vehicle having 35,000 more miles than the average 2010 Jeep Grand Cherokee for sale in your geographic area. For help in determining if your vehicle is a total loss, check out our total loss calculator on the right side of this page.
Also, when your vehicle is deemed a total loss, you may want to argue that you should receive a payment for tax, tags and registration fees for the year or pro-rata for the year. This amount is in addition to the actual cash value amount agreed upon between you and insurance company.
Do I get to keep my total loss vehicle?
Generally, you do not get to keep your total loss vehicle; however, you do have the option to repurchase the salvaged vehicle back from the insurance company. In other words, if your vehicle has been deemed a total loss, the ACV amount includes the price of your salvaged vehicle (meaning the insurance company buys the totaled vehicle, and therefore gets to keep the vehicle). However, if you do want to keep the vehicle, the ACV amount will be reduced by the salvaged price of your vehicle. The salvage value is generally determined by the going rates for the vehicle at a salvage yard and other more complicated factors.
For example, let’s assume that you have been in an accident and your vehicle has been deemed a total loss. The car is older, but you want to keep the vehicle. The agreed upon actual cash value between you and the insurance company is $8,000. However, because you want to keep the vehicle, that amount must be reduced by the salvage price. The salvage price of the vehicle is determined to be $2,000. Therefore, you get to keep the car and receive $6,000 for it being deemed a total loss (8,000 – 2,000 = $6,000).
Can I negotiate the actual cash value price?
Absolutely! You can and should try and negotiate the actual cash value price offered by the insurance adjuster. Due to the nature and methods used by the insurance company to determine the actual cash value amount, there may be room for the insurance adjuster to negotiate. Included below are some tips to help you negotiate your total loss claim.
Tips for Navigating your Personal Injury Claim
Ask for a valuation report.
A valuation report should provide you with a breakdown of how the insurance company calculated the actual cash value for your vehicle. Simply ask the adjuster to explain it step by step and note any discrepancies that may increase the value of your vehicle. For example, the report does not include a sunroof, when your vehicle has a sunroof, etc.
Research vehicles comparable to yours.
Be sure to research vehicles in your area that are similar to yours. Take into account their condition, milege and prices. You will likely need to visit websites like Autotrader or even dealerships to find a range of vehicles comparable to yours.
Check the Kelley Blue Book value of the vehicle.
Take the time to do the research yourself. Kelley Blue Book or NADA are great tools to utilize as they are free and some insurance companies use them as reference points in their decision-making process. Make sure, however, that you are honest with yourself as to the condition of your vehicle. For example, if your car’s paint is in poor condition, note it as so, as this will ensure that you will receive the most accurate valuation for your vehicle.
Use all of your research in negotiations.
Once you have thoroughly researched all the information above, take it to the insurance adjuster. Use the information to show deficiencies and discrepancies in their valuation. The more prepared you are, the better chance you will have at getting the insurance adjuster to increase their initial offer.
Liens and Loans on Your Vehicle
In cases in which the total loss vehicle has not been paid off, the remaining loan amount must be satisfied at the time of payment for your total loss. Once the loan or liens have been paid, any remaining balance will go to the owner of the vehicle. However, in the event that the loan amount exceeds the agreed upon actual cash value amount, the payment by the insurance company is made directly to the loan or lienholder, and any outstanding balance is still owed by the owner.
It is important to understand that if your car is deemed a total loss, the insurance company is not obligated to pay you what you owe on the car. The insurance company is responsible under the law to reimburse you the actual cash value of the vehicle before the accident.
Important Note: Whenever you purchase a vehicle on a loan basis, it is always a good idea to purchase GAP insurance. GAP insurance will pay off any remaining balance on your car loan if the agreed upon actual cash value does not cover the full amount.