Totaled Vehicles And Auto Insurance: What Every Driver Should Know
Posted on: 19 October 2020
When the average person thinks about a car being damaged beyond repair, or totaled, a severely wrecked car is what comes to mind. Consequently, when some drivers look at their vehicle and perceive that it is salvable, the word from the insurance company that the vehicle is considered totaled brings about confusion. To help erase some of this puzzlement, it is a good idea to learn more about the totaling process.
Value vs. Damage
The primary method insurance companies use to determine whether or not a vehicle is totaled is to compare the value of the vehicle against the cost of the repairs. When the cost to repair the vehicle outweighs its value, it is typically considered totaled.
For example, for a vehicle valued at $5,000 that sustains $8,500 worth of damage, the cost to repair the vehicle is upwards of $3,000 of the vehicle's worth. In this instance, the insurance company would likely just pay the insured the value of the vehicle, as paying for the repairs would be a loss on their part.
Deductible Application
Sometimes drivers are surprised when they receive a check in the mail that is lower than the estimated vehicle value report they received from the insurance company. The reason for the cost discrepancy is the deductible. All auto insurance policies have a deductible, and it is important to remember that this amount applies to every type of claim, even when the vehicle is totaled.
Given the previous example, if the driver had a $1,000 deductible, instead of receiving a check for $5,000, they would receive a check for $4,000. Make sure you understand that it is still your responsibility to cover this amount if you find yourself in this situation.
Value Not Amount Due
Another important planning tool is to ensure that you understand that the payment received for a totaled vehicle is based on vehicle value, it is not based on the amount due to the auto loan lender. For drivers that are upside down on their vehicle loans, there may be a difference in these values.
For example, in the case of a vehicle valued at $10,000, but with a loan balance of $13,000, the insurance company would cover the $10,000 payment, but the remaining $3,000 would be the owner's responsibility. Always review your terms so that you know exactly where you stand.
If you have specific questions about your vehicle or how an insurance company approaches totaled vehicles, it is always best to reach out directly to the auto insurance company for assistance.
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