Your Car Is Totaled: What Now?

Sometimes It's A Good Thing

California resident Chris Berry knows a thing or two about having his car totaled: It's happened to him three times. Particularly scary was the time his car was hit at speed, bending its frame and leaving it a total loss, by a driver who ran a red light then refused to admit he had done so.

About five million vehicles are totaled in the US every year (sometimes called a "total loss" or "write off"), or about 20 per cent of those involved in insurance claims every year. But what happens when your car is deemed totaled? How long does the process take to complete? Where does your car go once it's been declared a write-off? And does it affect your auto insurance? We take a look.

Berry says he's generally had satisfactory experiences with insurance companies since his first claim in 1997, when his 10-year-old Mercury Marquis was rear-ended on a freeway as he was driving north to San Francisco. He says the $1200 damage to his car was -- according to his insurance company -- more than the car was worth and, after a six-week police investigation, he soon got his check from the insurer.

"It was a four-car accident," Berry said. "I got hit from the rear and the side, and I was the only person in that who wasn't at fault."

How A Car Is Defined As "Totaled"
Berry went through two more "totalings," receiving a payment from his insurance company each time. In both of his unfortunate incidents, the cost of fixing his car was more than its inherent value.

Kip Diggs, a spokesman for State Farm Auto Insurance, defines a totaling, or "write off," as happening when "the cost of repair of the vehicle plus the probable cost of the salvage when sold is worth more than the actual cash value of the vehicle."

A common misconception is that major damage is the prime driver behind a car getting totaled. In fact, that's not a deciding factor; it's only about the costs.

As an example, a fender bender on a 20-year-old Chevy truck might end up in a totaling while major damage on a brand-new Lexus might not. If the costs of the repair are more than the vehicle's value, she's totaled. If not, repairs are usually made.

Insurance companies figure out the costs and vehicle values based on their own formulas for repair jobs. Some vehicles are totaled if the repairs are found to be at 51% of the car's value, while other companies in some instances use 80%.

What If You Want To Keep It?
Generally, drivers are happy to give up their car if it is deemed totaled. It's usually a pile of metal and rubber. But, in some cases, drivers look to keep their vehicle and repair it.

If your vehicle has been in an accident, you can request that you keep it, but this must be done very early in the process. The insurance company would then take out the costs of your deductible and the money they would have received at salvage, then give you the remainder of the car's value (often called the "actual cash value").
The Process
In the event of any wreck, a driver should record details of the scene in writing and by camera and exchange details with any other driver involved. Contact with the police, including a police report, is necessary.

Diggs says that an insurance company will use these written records alongside the police report to assess who is liable for the smash and then decide if the car is worth fixing or is a total loss. An insurance company appraiser, called a claims adjuster, oversees the process.

"If the other driver is at fault, their insurance will pay you the value of your car plus any additional damages that might apply," Diggs said. "There may be medical bills involved, or there may be items in the car that are damaged. If you're not at fault, the cost to your insurance company is almost nil, and there would not be an increase in your rates.

"If the other insurance company, for whatever reason, isn't acting as promptly as you'd like in handling the claim to your satisfaction, another outlet is to use your own collision coverage to go through the process of determining if the vehicle is a total loss. Your insurance company may pay for your vehicle and then go back to another insurance company through a process called subrogation."

The time it takes to determine a total loss can be anywhere from one week to two months. Diggs says that in instances where it is obvious a car is totaled -- if a car has burned down to its shell, for example -- then assessing is easy. In cases where it's not so clear-cut whether a car is a write-off, a consumer may take their vehicle for an estimate of the damage. In the event a car is not drivable, an estimator may be sent out by the insurance company. 

Diggs says a consumer may want to get two or three independent estimates.  "You want to have that proof that the car is going to cost more to repair."

What Happens To Your Totaled Car
After the claim is handled and settled, the totaled vehicle becomes the property of the insurance company.

Vehicles then typically go to a public auction, where they are sold to junk yards or salvage operations.

"They'll salvage what they can," Diggs aid. "Those parts will go back into the market and be sold to other drivers."

Many parts from totaled cars reappear into the market as used parts or remanufactured parts when they are combined with other new materials and refreshed and inspected for defects.

Read More About Car Insurance:

- Smart insurance buying
- Cut Your Car Insurance In Half
- Confessions of an Auto Insurance Agent

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