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The Total Loss Process
You just found out your car may be declared a total loss. Hearing this either from the shop where you chose to repair the car or from the insurance company is not usually good news (although sometimes it is).
What happens next in total loss car valuation? What is my vehicle worth? Can I keep my car even if the insurance company has deemed it a total loss? What if I disagree with the amount the insurance company offers? What is an "appraisal clause"? We hear these questions frequently from our customers. Feel free to call us to discuss your situation more in-depth.
What does "total loss" actually mean? In the simplest terms possible, a vehicle is considered a total loss when the cost to repair exceeds what the insurance company is willing to spend.
Note that I didn't say "when the cost to repair exceeds the vehicle's value".
What the car is worth (Actual Cash Value or ACV) is one factor, the cost to repair is another, and yet another is what the vehicle is worth in the condition it is in after the accident (salvage value).
Used Vehicle Example
A used 2022 Toyota Rav4 was purchased in 2024 by the owner for $20,000. The owner paid for the vehicle in full at the time of purchase, so no liens exist on the vehicle. The owner has both collision and liability coverage with a $500 collision deductible through their insurance company for the Rav4. The owner gets into an accident that was their fault. They call the body shop to have it towed and call their insurance company to report the claim. The body shop does a damage assessment after a partial disassembly, writes an estimate for $17,000 and sends the estimate to the insurance company for review.
The insurance company makes a determination that the car is a total loss. How did they come to this determination?
If the ACV is $20,000 and the cost to repair is $17,000, doesn't that mean that there is still $3,000 to work with? Yes and no.
After the owner is reimbursed for their vehicle's value, the insurance company owns the Rav4 and sells it at a salvage auction for $6,000 in its damaged state. $21,500 minus $6000 is $15,500.
The insurance company is spending less to total out the car than they would to fix it. Simple math.
Brand New Vehicle Example
Owner purchases outright a current model year Honda Accord new vehicle for $44,800 including tax, title and license fees ($4,800 approx.). The owner declines purchasing gap insurance but does purchase collision and liability coverage with a $500 collision deductible. The owner is involved in an at-fault accident 3 weeks after the purchase date. The estimate from the body shop to repair the vehicle comes to $27,000. The insurance company determines the salvage value to be $12,000 and the ACV is $35,000. New vehicles depreciate sharply immediately after purchase. As a result, the ACV dropped from $40,000 to $35,000.
In the example above, the owner will receive the ACV of $35,000 minus deductible $500 plus tax title and license fees (approx. $3,500) which adds up to $38,000.
The insurance company spent $35,000 minus the salvage value of $12,000 recouped at auction plus the cost of tax, title and license fees of $3,500 minus the owner's deductible of $500 which equals $26,000.
This is a situation that doesn't work out well for anyone.
When a Total Loss Outcome is a Good Thing
Some cars shouldn't be fixed. A bent frame on an older pickup, replacement of all the airbags on a high-mileage sedan, structural damage on a rusted undercarriage… there are many situations where the insurance company might balk at totaling a car, but the owner doesn't want it fixed. We do our best to provide the outcome that the owner wants. If you find yourself in this situation, call us to talk it over. We are experts in providing an in-depth damage assessment and can help get the desired outcome for you.
Get Reliable Help
Remember, the last thing you want to do is rely on the advice of someone who owes you money. You need an advocate on your side who can navigate the total loss process.
We are happy to help. Feel free to call us any time to discuss.
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