If you’re involved in a car accident, the insurance company may deem your car “totaled.” That usually means you’ll get a check, but often times it ends up costing you money in the long run. Here’s what to do when you’re told your car is a total loss.
When a vehicle is totaled, that means the damage is so extensive that the cost to repair it would exceed what’s it’s worth. From there, the insurance company is obligated to pay you a settlement, which is the fair market value of your vehicle, taking into account depreciation.
As you can imagine, that’s not likely going to be enough money to get you back into what you were driving when the accident occurred. So, in many cases, a totaled car will mean that you’ll have to buy another vehicle and re-up on a car note. That’s why many motorists hate to hear that their car is being totaled.
Insurance companies use several factors to determine whether to total a car or not, such as the specific condition of the vehicle, state laws and the insurer’s own policies, which vary depending on the company.
Money expert Clark Howard says regardless of whether you think your vehicle should be destined for the junk yard, insurers often use a mathematical formula to determine if it’s worth saving.
“If the airbags deploy and the car is four years old or older, they’ll likely total it because the airbags are such an expensive part of the car to fix,” he says.
Just one airbag can cost anywhere from $3,000 to $6,000 to replace, depending on the make and model, according to CostHelper.com
. Insurers would rather write the car off than spend that kind of money.
“If the insurer says that the fixes will be 70% of the car, oftentimes they’ll total it,” Clark says. That means that you’re back to square one as far as vehicles go. Meanwhile, the insurer goes their merry way — and your premium likely goes up.
Clark says when it comes to accepting the insurance company’s settlement, consumers do have some bargaining power that they may not be aware of.
“Some people may be able to work out an agreement with the insurance company to keep their vehicle as a salvage car,” he says.
The thing is, often insurance companies won’t disclose all of your options when they total your car. If your car is totaled, the insurer has the option of offering you either a full settlement (you give them the car and the keys) or a partial settlement.
With a partial settlement, you have two options, according to DMV.org
If you want to save money, there are some instances where having a salvaged vehicle may make the most sense for you.