What Is Total Loss Car Insurance?

If you are involved in an accident and the cost to repair your car is greater than the actual cash value (ACV), then your vehicle's insurance company will view it as a total loss. It's also considered a loss if your vehicle can't be repaired. Car insurance that covers total loss ensures that you have the appropriate coverages to cover the cost of purchasing a new car in case yours is damaged to the point of total loss. Your policy will likely include collision insurance as well as extensive insurance protection. If your vehicle is damaged and you've got the proper insurance coverages, the insurer will offer you the settlement. Sometimes, they'll pick up the car and send it to a repair shop to be repaired or rebuilt. The car will be given a salvage title to let prospective buyers know it suffered serious damage.

Filing an Insurance Claim for a Total Loss

Suppose your vehicle was damaged during an accident where another driver was the one to blame, and you cannot claim through the other driver's insurer. Your insurance provider could assist you with the claim process. In all states, except for New Hampshire, drivers are legally required to carry the minimum amount of liability insurance for property damage. (New Hampshire also has the law of financial responsibility that requires that not insured drivers show that they can pay for any damage they cause.) In most states, drivers need at least $10,000 of liability for property damage, and several states have set the minimum at $25,000. Drivers may purchase higher liability insurance than the state's minimum and are usually advised to do so if they own assets to shield themselves from lawsuits.

However, when you are in the wrong (or there was no other driver in the incident), the next step is to claim the insurance company you own. For this, you need the collision and comprehensive coverage of your insurance policy. Collision insurance protects against the damage to your vehicle in collision with other vehicles or objects like a tree or guardrail. Comprehensive insurance covers damage resulting from events other than collisions like flooding, wind, fire vandalism, and the falling object.

Comprehensive and collision insurance are both optional. They also have deductibles, the portion of the cost you have to pay before your insurer begins to pay its portion. For instance, If you have a deductible of $500 for your collision insurance and your vehicle is damaged during an incident, the insurer will subtract $500 from the settlement you receive under your insurance.

If you or a driver were responsible, insurers would assign an adjuster for claims to examine the car's damage and determine if it's an all-in loss. Suppose you don't agree with the adjuster's assessment and are not satisfied. In that case, it is suggested that the National Association of Insurance Commissioners (NAIC) recommends first trying to resolve the issue through your insurance provider. "If you and the insurer still dispute on the claim processing or settlement, you should seek for aid from the consumer services experts at your state insurance agency," the NAIC stated. If that doesn't help and the large amount involved, it's possible to hire an attorney in private or a public adjuster to aid in your claim.

Total Loss Claims and the Actual Cash Value

For an insurance settlement for an automobile that is an absolute loss, the policy must include either insurance for property damage (PD) or collision or comprehensive insurance on your insurance policy. PD is required in all states; however, the only way to get an amount from it is to claim the other driver's PD. To be eligible for reimbursement from PD, the other driver would also be reckless in the accident. Your insurance company is the most efficient and reliable way to receive a payout for the total losses. This can get through collision insurance. It doesn't matter if you were the one to blame for collision claims; however, you must pay the deductible before the insurer can cover the claim.

How Much Insurance Pays for a Totaled Car

What insurance company pays the car that is totaled depends on the coverage you've got included in the policy. If you're covered by collision and comprehensive coverage, the insurance company pays you for the value in cash of your car in the event of a total loss. If you loan your vehicle, make sure you know that the money you receive from your insurance company might not be enough to cover the car loan. The reason is that your car will depreciate in time. You'll have to pay the difference out of your pocket if it happens. This is why gap insurance is essential, as it will help repay your loan if the car is totaled and the value of its cash is less than the payoff amount.