Imagine this: You and your car figured in a road accident. Too bad, but such things happen, the very reason why auto insurance has become a thriving mega business. So you filed a claim with your insurer only to be told that your car has been totalled. The crumpled metal that used to be your car does look like a total wreck, but is that what ‘totalled car’ means?
If so (or if not), what does it mean to you and your claim, does the insurance company have the last say, and what can you do about it?
That’s one question after the other, but we'll take them one by one. After reading this article, you'll be able to thresh out all the confusion and hopefully make smarter decisions.
But first, let’s talk about what your insurance provider means when they say they will total your car.
What Is a Totalled Car?
In the context of cars, ‘totalled' is another word for total loss. It refers to vehicles that have been damaged in an incident covered by a comprehensive insurance policy and declared by the insurer to be a total loss.
This happens when the insuring company assesses the damage and finds that: (a) your car is beyond repair, (b) it will cost more to repair the car than what it is worth, or (c) it will cost more to repair a car than a percentage (say, 50% or 75%) of its value.
You should find out what your policy says about total loss and refer to applicable laws or statutes setting the total loss threshold in your state or territory.
What happens after your car is totalled?
If you agree to the insurer’s total loss settlement, you will be paid the actual cash value of your car, less deductions as stipulated in the insurance policy. The damaged vehicle will then go to the salvage yard, where it will be wrecked or sold for parts.
If you opt to keep the totalled car, your cash payout will be net of the salvage value. Take note, however, that you will only be allowed to drive the car again if you get it repaired and declared a rebuilt vehicle.
Procedures and conditions for total loss claims vary between states and depend on what your insurance policy stipulates. Some insurers may even replace your car with the same make and model, subject to specific requirements.
But what if you don’t agree to your car being totalled?
Can You Dispute Your Insurer’s Decision to Total Your Car?
Yes, you can. It could be that you disagree with the irreparability or the valuation of your car. Whatever your position is, the answer is 'Yes,' you can dispute the total loss settlement. However, it doesn’t stop there. You will have to hire your own appraiser, consult a lawyer, and negotiate further with the insuring company.
Sometimes, the bottleneck is in determining the extent of the damage; for instance, you believe that the repair cost will be less than the actual cash value of your car. Do note, however, that even if that were the case, it is not always practical (or safe) to repair a vehicle if the damage involves critical parts, or the cost approaches its actual market value.
Whether you eventually decide to dispute or agree with your insurance provider, you will have to negotiate with them. Is there a way to win in this situation? Let’s see.
What’s the Best Way to Negotiate for a Totalled Car?
Insurance companies exist to make a profit, just like other types of business. Each time they make a payout for claims, they lose money, so it's not surprising they'll want to pay less for your totalled car. In the first place, the reason they’ll want to declare your vehicle totalled is so they don't need to spend so much repairing it.
With this in mind, you should be smart enough not to jump at the first offer the company makes. There are two points of disagreement in negotiating for a total loss car claim—the car's value before the accident happened and the cost of repairing it.
Be prepared with your car’s sticker details.
Of course, you will not be paid the sticker price, but the insurance adjusters will base their computations on the original value and take it from there. Your car's details—like make, model, model year, trim, features, mileage, and servicing information—will come into play. It's to your advantage to ensure that all these factors are accounted for in the valuation and you're paid reasonable compensation.
Know how much your car is worth.
Don't wait for the adjuster to make an offer before you do due diligence. Research your car's retail value (NOT the trade-in value) as if you were selling it in its pre-accident condition. Refer to car pricing apps and print the result of your research. Locate your receipts for recent big-ticket items you’ve added to your vehicle (such as upgrades or a new set of tyres) and factor these into your calculations. After doing your homework and before seeing the adjuster, make sure to have a minimum settlement amount in your mind. It will act as your point of reference during the negotiation.
Ask for the total loss valuation report.
If consensus isn't forthcoming, ask for the total loss valuation report. It will show the auto data used by the adjuster in computing your car's value. Read what your insurance policy provides about independent appraisal procedures and prepare to hire your own appraiser.
Have all agreement details in writing.
Only a written settlement agreement will hold water, so make sure to ask the adjuster to have everything in writing. Confirm that all the details used in the valuation match your car’s, including the mileage. The document should stipulate the following: (a) sales tax and who is paying it, (b) the amount to be paid by the insurer to the financing company, and (c) the net amount you will receive.
If still in doubt, seek legal advice.
This article should not take the place of an attorney or legal adviser, so if you find yourself in doubt or your insurance claim unresolved, don’t hesitate to consult one.
We have more articles about insurance in our blog; so we’re inviting you to visit Carpart.com.au and learn something new every day!
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By JMSL