What Happens When Your Car Is Declared a Total Loss?

If you have been in an auto accident and your car suffered extensive damage, there is a chance that your insurance company may say that it is a “total loss”. Consider you are driving in a 60 speed limit street when suddenly a dog runs past your car, followed by a kid chasing it. Your topmost priority would naturally be to save the kid. However, you may end up crashing your car in a tree or a utility pole. While you may be happy that the dog and kid is safe, your car is completely totaled. What would you do in such a situation?

What is meant by a Total Loss?

After the accident, you have to call your insurance company. The insurance provider will assess whether the damages sustained are repairable or your car is a total loss. A vehicle is declared a total loss when the cost of repairs exceeds the car’s value, or when the car cannot be restored to a condition where driving it can be considered safe.

If your car is a total loss, your insurer will evaluate its market value, i.e. the worth of your car before the accident took place. On the other hand, if the damages are less than the car’s values, the insurance provider will pay for the repairs up to your policy limit.

In case you have been in an accident with another driver where the other party was at-fault, you can make a claim on their insurance company to get compensation for the damages. You may also make a claim for the diminished value after your car has been repaired.

What if the Total Loss Payment is not enough to cover your Car Loan?

Since the insurer will only pay the market value of your destroyed property, you may end up with less money to cover your outstanding car loan. Consider you owe $12,000 on your car loan, but at the time of the accident, the market value of your car was $9,000. After declaring your car is a total loss, the insurance company will only pay you $9,000, leaving you with $3,000 in excess on your loan, even though you do not have a car anymore.

Moreover, your insurer has the right to sell the remains of your car on the secondary market after it has been proclaimed to be a total loss. This is done so that it can recover some of its losses. You may try and convince the insurance company to allow you to keep the car, but that is highly unlikely to happen.

There are many complications and intricacies involved in total loss and diminished value claims. If you have been involved in an accident where the at-fault driver totaled your car, you should talk to an experienced and reliable auto accident attorney before making a claim. Contact the Law Offices of Robert T. Edens, P.C. at (847) 395-2200 or online today to schedule your initial consultation.