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Total warfare: What to do when your auto insurer totals your car

Your car suffered major damage in an accident. Now what? Do you buy a new one? Do you have it repaired? In most cases, that's a decision that will be made by your car insurance company. If you disagree, you can try to work out a deal to pay for repairs. If you can't agree, you can fight your insurer — but get yourself familiar with the claims process first.

If the cost of repairing your vehicle exceeds a certain percentage of your car's value before the accident, insurance companies will declare it a "total loss." Some car insurance companies will total a vehicle if damages are at or above 51% its pre-accident value. Other insurers will total at 80%. State insurance departments often set guidelines for the percentage at which cars can be totaled.

total lossMore specifically, your insurer will weigh the cost of repairs plus reimbursement expenses for a rental car against the car's actual cash value.

For example, your insurance company may declare your 15-year-old Buick a total loss if it suffers minor damage because the car's value is already low and repairs are expensive. At the same time, major damage to a brand-new Lexus might not make it a total loss. Auto insurance claims adjusters usually determine a car's actual cash value by using their company's proprietary database of values.

A car generally is considered to be a total loss when the estimated cost of repair plus the salvage value equals or exceeds its actual cash value.

If the insurance company totals your car, it will pay you the car's actual cash value, minus your deductible, and your car is then sent to a salvage yard to be auctioned off to the highest bidder and usually chopped up for parts. The insurance company keeps whatever money it got for the car in salvage.

But there are exceptions, since claims are handled on a case-by-case basis in accordance with state regulations.

Options for keeping your totaled car

What if you really love your car and you don't want them to take it away? Maybe you don't agree with your insurance company's assessment of the damages. You have options on how to keep a totaled car, but they are limited.

When you buy a car insurance policy, you sign a contract that states that you can't force your insurer to pay out more than your car is worth. On the other hand, most states require insurance companies to follow the "made whole" doctrine, meaning you should be restored to the same financial position you were in prior to the accident.

In 2018, about 19% of collision and liability claims in the United States resulted in the cars being totaled, according to CCC Information Services, a company that tracks auto claims for the insurance industry. Total loss frequency has increased about 1% year-over-year since 2013. This is primarily due to people driving older cars longer and rising repair costs that are increasing faster than vehicle values.

If your car is declared a total loss but you want to have it repaired anyway, you should be able to retain it. Can your insurer decide to total your car despite your protests?

 In some cases, your insurer will work with you if you "elect to retain salvage" in accordance with their policy language and state law.

Your insurer still has to pay you the car's actual cash value, minus the deductible and minus what the company would have gotten for it at the salvage yard. If you want to keep the car, you should alert your claims adjuster and insurance company right away. You're then going to have to pay for the repairs yourself.

Make sure you think your decision through. If you decide to give up your car but then you change your mind, you're going to have a hard time buying it back at auction.

License to buy

In most states, your car is gone for good once it goes to auction. Regulations vary, but in many places you won't be able to attend the auction without a special license for auto salvagers or auto dealers. It's good to call the auction house beforehand to see if you will need a license in order to bid on your car.

If you do get your car back from your insurer, you'll be left with a badly damaged car and perhaps only a fraction of the money needed to repair it. If the car is really beyond repair, you'll be left with a carcass of a car and a check that's not quite enough to buy you a new one.

If the car is repairable, make sure you have all the necessary work done. Insurers can refuse to completely cover a car that's been totaled if it hasn't passed a department of motor vehicle (DMV) inspection — often a necessary step in getting your car back on the road. As long as it passes DMV inspection, however, you should have no problem buying insurance.

The price is wrong

People who complain about their total loss settlements generally don't want their old, crashed cars back. Instead, they complain that their insurers didn't give them enough money to buy a similar car. Your insurance company's estimate of what a comparable car will cost may differ from your estimates. Your insurance company will look at many variables, such as the value of your car in its pre-accident condition, logged mileage, special equipment and features, and local market prices for that year, make and model.

Totaling Tips

You may be entitled to claim the costs of sales tax, title and registration fees when you buy a replacement car after yours is totaled. For more, read about recouping expenses after your car is totaled.

What if the insurance check for your totaled vehicle is less than what you owe? To avoid being in the red, save yourself some grief and buy gap coverage when you purchase a new car.

If you disagree with the insurance company's assessment of your vehicle, you can hire an independent appraiser at your own expense to perform an inspection of your vehicle (contact a local body shop or garage to find one). Be sure to get a detailed inspection put in writing. Then present that information to your insurance company.

If you still can't come to an agreement on value, contact a consumer representative at your state's department of insurance. This representative should investigate your case and can help you resolve the differences with your insurer.

If you've exhausted all these measures with no satisfactory results, you have two options: arbitration or litigation. But before you decide to hire an independent appraiser, or even pursue the matter in court, you should weigh whether the fight to get more money for your vehicle is worth it.

Bring in the lawyers

Landing in a courtroom over a totaled-vehicle settlement isn't very likely, but knowing your options is an advantage that consumer advocates continually stress. Knowing how the claims process works, as well as what to do when you are not satisfied with it, will get you the most for your insurance dollars.

Arbitration is a process in which you and the insurance company present your facts to a third-party arbiter. Arbitration can be binding (which means the arbiter's decision is final) or non-binding (meaning you can still take the insurer to court if you are unsatisfied). Generally, this process for settling a complaint is less of a hassle and less expensive than a lawsuit.

However, if you choose to enter arbitration, it’s a good idea to hire a lawyer. Insurance companies are represented by lawyers and you may be at a disadvantage without one to represent you.  Hiring an attorney may increase the odds of a satisfactory outcome for you, but it will cost you money.

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