After a car accident, it's not always easy to predict what the car insurance company will do when it receives your vehicle damage claim. Will the insurance company pay to fix the car, or will the vehicle be declared a "total loss"?
As a general rule, older cars that sustain the same amount of damage as newer cars are more likely to be deemed a "total loss" by the car insurer. This is mainly because the ratio of the repair cost to the car's value is much higher. Generally speaking, the car insurance company will total your car if the cost of repair plus the car's salvage value is greater than the car's actual cash value (this is known as "ACV" in insurance company parlance). In addition, depending on which company insures your car and the state in which you live, the company may total the car if the cost of repair plus salvage value meets a certain threshold percentage (typically 75%) of the car's ACV. Let's take a closer look at the process.
When you make a car insurance claim for property damage, the first step in the insurance company's evaluation will be to obtain a complete and accurate assessment of the car's damage, and the cost to repair it. This is true whether you make the claim under your own policy or the other driver's (the latter is known as a "third-party" car insurance claim.)
In many cases, the full extent of the damage sustained in the accident is not readily apparent; an example is a bent frame, which might not show itself until inspection of the chassis. So it's in the insurance company's interest to make sure that its estimators are skilled and experienced in assessing all aspects of damage, including structural integrity, mechanical function, and cosmetic appearance.
Once a repair cost estimate is obtained, the insurance company will then consult its resources -- including Kelley Blue Book -- as well as the company's internal processes -- to determine the car's ACV, which roughly represents the amount the car would sell for at retail on the used car market. This determination will require information as to the car's make, model, model year, mileage, options, add-ons, and overall general condition.
The car's overall general condition is an important factor, because if the car was already damaged prior to the accident, the insurance company will not include the cost of non-accident related repairs in its repair cost estimate. In other words, if the insurance company decides to repair the car rather than total it, you should expect to get the car back with the same dents and dings it had before the accident occurred.
When the insurance company knows the cost to repair the car and its ACV, it will then consult its own protocols and state law to determine whether the car should be repaired or declared a total loss. As we touched on above, some states have laws that require insurance companies to total cars when the ratio of the repair cost plus salvage value, compared to the car's ACV, yields a certain threshold percentage such as 75%. For example, if the repair cost is $5,000, the salvage value is $500 and the ACV is $6,500, the ratio would be 85%, and the car would be declared a total loss. In the absence of such a state law threshold, the insurance company will proceed according to its policies and practices (and if you're making a claim under your own coverage, these details can be found in the fine print of your car insurance policy).
The lesson to be learned here is that there are no foregone conclusions when it comes to whether your car will be declared a total loss. Each situation is unique and the insurance company's decision might come as a surprise. Learn more about car repairs and vehicle damage after a car accident.
