Dealing with car damage after an accident is stressful, and understanding the insurance claim process can be confusing. A common concern for car owners is when their vehicle is declared a “total loss,” or “totaled.” This often leads to the question: what repair percentage does insurance use to total a car?
This article, brought to you by Car Repair Online experts, will clarify how insurance companies determine when to total a vehicle, and what your rights are in such situations. We’ll break down the key factors involved, ensuring you’re informed and prepared when navigating the complexities of car insurance claims.
Understanding When Your Car is Totaled
When your car is damaged in an accident, the insurance company will assess the damage to determine if it’s economically feasible to repair it. A car is generally considered “totaled” when the cost of repairs equals or exceeds the vehicle’s market value. This is often referred to as a constructive total loss.
While there isn’t a fixed repair percentage that universally triggers a total loss declaration, the principle is based on a simple comparison: repair costs versus vehicle value.
Example:
Let’s say your car is valued at $5,000 before an accident. After the accident, the estimated repair cost comes out to $5,000 or more. In this scenario, the insurance company is likely to declare your car a total loss. Why? Because spending $5,000 or more to repair a car that’s only worth $5,000 doesn’t make economic sense for the insurer.
How Insurance Companies Calculate Vehicle Value
To determine if your car is totaled, the insurance company first needs to establish its pre-accident value. They typically use industry-standard guides to assess this, ensuring a fair market value is determined.
Common sources for vehicle valuation include:
- NADA Used Car Guide: A widely recognized and respected source for vehicle values.
- Automobile Red Book: Another reputable guide used in the automotive industry.
- Mitchell International, Inc., CCC Information Services Inc., Audatex North America, Inc.: These are companies providing valuation services and data to the insurance industry.
Insurance companies are often required to use at least two independent sources when determining your vehicle’s value to ensure accuracy and fairness.
What Happens When Your Car is Totaled?
If your insurer declares your car a total loss, they will typically offer you a settlement based on the vehicle’s pre-accident value, minus your deductible if applicable. In addition to the vehicle’s value, the settlement should also include applicable sales tax in some states.
You have a few options when your car is totaled:
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Accept the Settlement and Relinquish the Vehicle: You receive the agreed-upon settlement amount, and the insurance company takes ownership of the damaged vehicle. They will then typically sell it for salvage.
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Keep the Vehicle and Receive a Reduced Settlement: In some cases, you may want to keep your totaled car, perhaps to salvage parts or repair it yourself (though this is often not recommended for safety reasons if the damage is severe). If you choose this option, the insurance company will deduct the salvage value of the vehicle from your settlement. The salvage value is the estimated amount the insurance company could get for selling the car as scrap or parts. You will also receive a salvage title for the vehicle, and it will need to be inspected and re-certified by the Department of Motor Vehicles before it can be legally driven again.
Disputing a Total Loss Valuation
If you disagree with the insurance company’s valuation of your totaled vehicle, you have the right to dispute it.
Here’s what you can do:
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Request Documentation: Ask the insurance company for a detailed breakdown of how they calculated your vehicle’s value. This should include the sources they used (like NADA or Red Book) and any specific factors that influenced the valuation.
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Provide Counter-Evidence: Gather your own evidence to support your claim for a higher vehicle value. This could include:
- Recent appraisals from dealerships or independent appraisers.
- Advertisements for similar vehicles in your area that are priced higher.
- Documentation of recent repairs or upgrades that increased your car’s value.
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Negotiate with the Insurer: Present your evidence to the insurance adjuster and try to negotiate a fair settlement. Politely and clearly explain why you believe their valuation is too low and provide your supporting documents.
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Consider Appraisal Clause or Arbitration: Many insurance policies include an appraisal clause, which allows for an independent appraisal to settle valuation disputes. Some states also offer arbitration programs through the insurance department to help resolve disagreements without going to court.
Repairing a Totaled Car? Think Twice
Even if you find a repair shop that offers to fix your totaled car for significantly less than the insurance estimate, it’s crucial to understand why insurance companies total cars in the first place. It’s not just about saving money; it’s also about safety and long-term reliability.
Vehicles are often totaled when the damage is extensive, affecting structural integrity or critical systems. While a discounted repair might seem appealing, it could lead to:
- Safety Concerns: Improper or incomplete repairs on a severely damaged vehicle can compromise its safety in future accidents.
- Hidden Damage: Total loss damage often includes hidden issues that may not be apparent during a superficial inspection, leading to future problems and expenses.
- Reduced Resale Value: A vehicle with a salvage title due to being totaled will have a significantly lower resale value, regardless of the repairs.
- Potential Insurance Issues: Insuring a previously totaled and repaired vehicle can be more expensive or difficult.
Therefore, while you technically can repair a totaled car if you keep it with a salvage title, it’s generally not advisable unless you are fully aware of the risks and implications and plan to keep the car indefinitely.
Choosing a Repair Shop – Your Right
Regardless of whether your car is ultimately totaled or repaired, you have the right to choose any repair shop you prefer. Insurance companies may provide lists of “preferred” shops, but you are not obligated to use them.
Key points to remember about repair shops:
- Your Choice: You decide where your car is repaired. Don’t feel pressured to use a shop recommended by the insurer if you prefer another.
- Preferred Shops: Insurers often have agreements with preferred shops for discounted rates. This is why they might suggest them, but it shouldn’t limit your choice.
- Negotiating Repair Costs: Ideally, your chosen repair shop and the insurance company will agree on a repair price. However, if they disagree, you might have to pay the difference between the shop’s rate and what the insurer is willing to cover. Always get written confirmation of agreed pricing before repairs begin.
Navigating Repair Cost Disagreements
Disagreements about repair costs are common. Here’s how to handle them:
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Request Re-evaluation: If the insurer’s estimate is lower than your repair shop’s, ask the insurer to re-evaluate the shop’s estimate. Provide detailed documentation from the shop justifying their pricing.
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Negotiate: Try to negotiate a compromise between the insurer and the repair shop. Sometimes, a slight adjustment from both sides can resolve the issue.
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Arbitration or Complaint: If negotiation fails, explore arbitration options (if available in your state, often through the insurance department) or file a formal complaint with your state’s insurance regulatory body. These processes can help resolve disputes without resorting to lawsuits.
Aftermarket Parts vs. OEM Parts
Another point of potential disagreement can be the type of parts used for repairs. Insurance companies may try to use aftermarket parts (non-original equipment manufacturer parts) or recycled parts to save costs.
Your rights regarding parts:
- Notification: Insurers are generally required to notify you if they plan to use aftermarket parts in your repair estimate.
- OEM Option: You usually have the option to request OEM (original equipment manufacturer) parts, but you may have to pay the price difference if OEM parts are more expensive.
- Recycled Parts: Using recycled parts is also permissible, and they can be either OEM or aftermarket. Again, you should be informed if recycled parts are being used.
Conclusion: Be Informed and Advocate for Yourself
Understanding the repair percentage that leads to a car being totaled, knowing your rights regarding repair shops and parts, and being prepared to negotiate are crucial steps in navigating car insurance claims effectively.
While there’s no magic repair percentage that automatically totals a car, the core principle is the comparison of repair costs to vehicle value. When repair costs approach or exceed the vehicle’s value, insurers are likely to declare it a total loss.
By being informed, asking questions, and advocating for your interests, you can ensure a fairer and smoother car insurance claim process, whether your car is repaired or declared a total loss.
