You have just had your car damaged in a car crash or other similar occurrence. The claim is sent by the insurance company, who inspects your vehicle. The insurance company inspects the vehicle and determines that it is totaled. Or they may determine that the car is repairable but you feel it should be totaled. How do you know if a car is totaled? Total. The decision about whether or not a vehicle will be a total loss is made solely based on economics. You need to decide if the repair is financially feasible. If not, then you should consider selling the car to salvage and buying a brand new vehicle. Let’s examine a few scenarios to see how this decision might look.
Let’s imagine that you are in an extremely serious car accident and your vehicle sustains major damage. The car was valued at $10,000 on the day of the accident. The car’s salvage value has increased to $2,000. If, for example, the estimate of the repairs costs shows that it would be $9,000 to repair the vehicle, the car will likely be declared a total lose. Because the total repair cost plus salvage value will exceed the car’s final value, this is why the car will most likely be declared a total loss.
Pre- Accident Value: $10,000
Post-Accident Value: $2,000
Post-Repair Value: $10,000
Value Increase: $8,000
Repair cost: $9,000
It would be uneconomical to spend $9,000 to fix the car. This would mean that you would have spent $11,000 to repair a car worth $10,000. ($9,000 repair costs, plus $2,000 salvage value). It would have been cheaper to sell the salvage and spend $8,000 on a new vehicle.
What if the cost of repairing your car is $7,000? What if it only cost $7,000 to fix the car? As we saw in the previous example, the vehicle that was repaired would have the same value as its pre-accident value. This is not always the case. A repaired vehicle is rarely worth the same as a factory-original vehicle. It is important to consider the post-repair value. If, for example, the car in the previous example had a $8,000 post-repair value, it wouldn’t make sense to spend $7,000 on repairs.
Pre-Accident Value: $10,000
Post-Accident Value: $2,000
Post-Repair Value: $8,000
Value Increase: $6,000
Repair Cost: $7,000
The repair cost is still less than the loss in value. However, it would not affect the salvage value enough to justify the expense of repairs. Also, it is important to ask the ultimate question: Will the repair price increase the salvage value by more than the costs of repair? If the answer is yes, the car can most likely be fixed. If it’s not, the car is considered to be total loss.
This is the standard procedure for most insurance companies. However, sometimes it is not possible to get the exact figures needed to make this determination. Insurance companies generally use a basic threshold to determine if a vehicle is lost or total. An adjuster will usually declare a vehicle totaled if the repair cost exceeds a certain percentage of the vehicle’s value before it was damaged. While the threshold will vary from one company or another, it is generally based on a ratio of 70% to 75% or any other percentage. Although this is a quick way for most insurance companies to make a determination, it will likely be based on some statistical analysis of past claims.
Do not be afraid to question the adjuster about their decision. Most insurance companies are trustworthy and will share the information with their customers. This will allow you to verify the numbers.
