If you’re involved in an accident, your insurance company will deem your car a “total loss” when the repairs would:
- cost more than your car is worth, or
- not restore your car to a safe driving condition.
When this occurs, you’ll need to notify your insurer that you were involved in an accident and they’ll open a claim on your behalf.
(To learn about the difference between total loss and diminished value claims, see Car Accidents: Total Loss and Diminished Value Claims.)
After the accident, your insurance company sends an adjuster to inspect your vehicle. If your vehicle was drivable after the accident, the adjuster typically comes to your home or another location that’s convenient for you to do the inspection. But if your vehicle was towed from the scene, the adjuster will inspect the vehicle at the tow yard or wherever it was taken to.
The purpose of the inspection is to determine whether the vehicle is a total loss.
Determining the Value of Your Vehicle
Insurance companies use several methods to determine the amount they’ll pay following a total loss. Most companies will pay the “actual cash value” of the vehicle at the time of the accident minus the deductible.
Actual Cash Value
Insurers typically calculate actual cash value by taking the cost to replace the vehicle—called the “replacement value”—and subtracting any depreciation. Insurance companies normally base replacement value on the sale prices of similar vehicles in the area. Next, they assess depreciation by looking at the per-accident condition of the car. Mileage and prior damage are often the main sources of value depreciation. The replacement value minus the depreciation equals the actual cash value.
If you disagree with your insurer’s actual-cash-value calculation, you should ask how the company came up with the number. Make sure the determination considered any extra features or equipment your vehicle had. Also, provide any documentation that shows your vehicle was worth more than comparable vehicles in the area.
What Happens to the Vehicle
Once the vehicle is totaled, the insurance company takes ownership and obtains a salvage title. In other words, you sign over the title of the vehicle in exchange for payment.
Questions for an Attorney
- Do I have to be present when the adjuster inspects my vehicle?
- What if I disagree with the total loss determination?
- Do I have to inform my insurance company even if the accident wasn’t my fault?