Your Car Is Totaled: What Are Your Options? How is the Actual Cash Value Determined?

A car has been “totaled” when it is so damaged that it would cost more to fix it than what it is actually worth.  Insurers differ on how much damage must occur before they consider a car totaled, but over 50% damage will typically do it.  When that happens, you generally have two options:

• Take the money and run. Most insurers will offer you the car’s actual cash value (ACV) minus any deductible you might have.  Insurance companies generally sell totaled cars to salvage yards and the insurance company keeps those profits. 
• Keep the car and have it repaired. In this scenario, you can take the ACV, minus the deductible and the amount the insurance company would have gotten at the salvage yard, and fix the car yourself.  Keep in mind that these insurance proceeds are usually not enough to fix the car, so make sure you think it through.  In addition, totaled cars generally need to go through a state inspection and insurers are sometimes hesitant to insure cars that have been totaled (which will be noted on your title).  So if your plan is to keep the car and not get it fixed, better think twice if you intend to drive it again.

Whichever option you choose, make sure it’s an informed decision and don’t sign anything if you are not certain of the terms.  It is best to have an attorney look over the documents first.

How Does the Insurance Company Arrive at an ACV for a Totaled Vehicle?

What if you think your car is worth more?  Insurance companies differ on how they determine the ACV of a vehicle.  They will tell you that it is the fair market value of the car—or, what a willing buyer would pay a seller.  Some rely solely on the Kelly Blue Book.  Others call around to used car lots and get prices on the same year, make and model of car with similar features and deduct or add where the features are different.  If you disagree with the value they have quoted, you do have options:

• Provide documentation to support a different value, such as newspaper or Internet ads and photos for the same car with sales prices higher than what the insurance company is quoting.
• Negotiate a settlement on the value using your documentation
• Utilize the Appraisal Clause in your policy, which usually provides that you and the insurer each hire your own appraiser to determine the value of the vehicle.  If the two appraisers agree, it’s settled. If not, a third (referee) appraiser is hired to help reach the decision.
• Seek the advice of an attorney.

Whichever way you go, don’t just accept what the insurance company tells you because you don’t know what else to do.  These tips will help you do what’s best so you get a fair settlement.