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Ask the Car Insurance Expert

I totaled my car and my car insurance company told me that it will reimburse me for the sales tax on the value of my totaled car. What is the time frame for the reimbursement? They told me 30 days after the day of the settlement letter. But an Internet source says 30 days after I buy the replacement vehicle. What would you say is the correct timeframe?

In a total loss settlement, car insurers in 32 states must pay for the sales tax to replace a crashed vehicle with a new or used one. The time frame for reimbursement depends on where you live. Some states set a time period for claims payment, and others mandate a "reasonable" time frame. Check with your state department of insurance to learn whether there's a time period requirement in your state.

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Insurers in some states don't have to pay sales tax, title and registration costs in total-loss settlements up front. In Ohio, you must submit those costs to the insurance company within 30 days of the purchase date of the new car. In Missouri, you fill out an affidavit from the insurance company to file with the state's revenue department so you can skip paying the sales tax on the newly purchased vehicle. In other states, such as Arizona, Kansas and Minnesota, insurers must include future sales tax as part of the total-loss settlement check. The insurance companies in these cases calculate the sales tax as a percentage of the settlement.

Meanwhile, in states where you can get reimbursed, insurance companies will cover the costs of the total loss settlement for your original vehicle, not the newer vehicle. For instance, if you totaled an old car and received $5,000 from your insurer and used that money to purchase a car for $20,000, your insurance company would pay you the sales tax on the $5,000, not on the $20,000 amount.

For more, see recouping expenses after your car is totaled.

Last updated: Jan. 26, 2011
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