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Is my car a total loss?

We hear quite often from our customers that “the insurance company totaled my car, but it doesn’t look that bad and I am still driving it.” So today we are going to discuss when and why an insurance company deems a vehicle a total loss. “Total Loss” does not necessarily have anything to do with how bad a collision damaged car looks, rather more times than not it boils down to economics. What I mean by economics is, does the repair cost of the vehicle exceed the value of the vehicle. An example of this is if your vehicle is worth $4000.00 and the repair cost are estimated at $5000.00 then your vehicle would be a definite total loss. Every now and then an insurance company will deem a vehicle a total loss due to structural damage, flood damage or other circumstances, but most of the time it is pure economics. The laws in the State of Kansas cannot force an insurance company to spend more money on repairs than what the vehicle is worth. As a matter of fact, the laws in the State of Kansas will force an insurance company deem a vehicle a total loss when damages exceed 75% of the value of the vehicle on vehicles that are 5 years old or newer. Older vehicles do not apply to this law, but most insurance companies still use the 75% rule on most of the claims. With that being said, an insurance company can deem a vehicle a total loss on a lesser percentage.

So, what happens next?

When an insurance company determines that a vehicle is a total loss, they owe you the current value of the vehicle along with title fees, tag fees and sales taxes. The vehicle can be valued in many ways, but the value is definitely negotiable. There is nothing that is etched in stone as to say your vehicle is worth “X” amount of dollars. There are several factors that determine value. Examples are mileage, options or packages and condition. Mileage is probably the biggest factor as a vehicle with above average miles is worth less than a vehicle with minimal mileage. The same applies with the condition of the vehicle. We advise our customers that when an insurance company starts talking about totaling your vehicle, get your own evaluation. There are again, many ways to value a vehicle. You can do comparison values, meaning that you find a similar vehicle with similar mileage, options and condition and use that as a value. You can use some online services such as National Auto Dealers Association or NADA, Kelly Blue Book or others. Whichever valuation that you use, DOCUMENT, DOCUMENT, DOCUMENT. Your valuation means more with written documentation than with oral documentation. This means print any online valuation or clip newspaper used car ads or even get written valuation from any car dealer. All of this documentation in no way means that they owe you that price, but rather gives you a negotiation factor. It is still up to you to negotiate the value of your vehicle. The insurance company is looking out for their interests, you need to look out for yours. If after all of this you cannot come to an agreement on value, it might be time to seek additional means to settle, up to and including an attorney.

OK, we have agreed on value, now what?

Once you have agreed on a value, the insurance company “buys” the vehicle from you. Again, they only owe you the value, title fees and taxes, less your deductible if applicable, nothing else. They will write you a check for the agreed price plus the additional fees and they take possession of the vehicle. At that point you can start shopping for a replacement vehicle.

What if I want to keep my car?

Most insurance companies will negotiate with you and let you retain your vehicle. They do this by starting with the agreed upon price and deduct from that what they call “salvage value.” What is salvage value? This is a value that the insurance company would get if they retained the vehicle and sold it at auction. They can’t actually predetermine what the vehicle will sell for at auction, but they more than likely have historical records of what similar vehicles have sold for in the past. Some insurance companies just use a percentage of value, like 25 to 50%. Regardless of which way they determine salvage value, USE CAUTION in determining whether you retain your vehicle or let it go. The vast majority of the time, your settlement offer will not be enough to complete the repairs of your vehicle! We advise our customers to never invest more money into your vehicle that what it is worth. This would lead to what we call being “upside down” in your car. Not a very good position to be in. In rare cases it is worth retaining your vehicle. Examples of this could be if you know your vehicles complete mechanical history, or the vehicle is drivable and you plan on no repairs, like hail damage or storm damage. But again use caution because once you settle, the vehicle is yours! If you decide to repair, any additional damages discovered while in the repair process will come out of your pocket. NEVER make repair decisions that would adversely affect safety. Additionally, repaired or not, your vehicle is worth less money once it has been totaled as it will have a salvage title, and some insurance companies will not re-insure for full coverage.

Do what is best for you!

Review your circumstances and determine which path benefits you the most. Do not let anyone talk you into doing something that you are uncomfortable with. Consult your repair shop and question them about the possibility of additional expenses before you make your final decision.