The term “totaled” comes from the insurance term “total loss.” Put simply, when the cost of repairing a damaged vehicle exceeds the cost (or a set percentage of the cost) of repairing the vehicle, it makes little financial sense to spend the money for repairs. The insurance company calls the vehicle a total loss, and gives you cash for the vehicle.
Many drivers are upset when an insurance company tells them their car is totaled. When we think of a totaled car we think of a mangled pile of steel. However, since the decision to total the car is based on the amount of money it will cost to fix the car, and the damage may not always be apparent, a car that still looks fixable (especially to an owner who can’t bear to part with it!) may actually be totaled.
In some states drivers have some recourse, and can work with the insurance company on determining what will happen to the vehicle. For instance, shopping around for better estimates from trusted body shops, as well as finding shops that will use non-manufacturer parts, may lower the cost of fixing the vehicle. Check out state websites and know your rights. But keep in mind, the insurance company is not only considering the cost of the repairs, but also the cost of your rental vehicle, towing, storage, and any other incidental expenses associated with a lengthy and complicated repair. You may also choose to keep the totaled vehicle if you are hopelessly attached (is it your property), but the insurance company will not be able to get paid by the salvage yard, and this may affect your payout. Keeping a totaled vehicle, moreover, is not usually in your interest (unless you like the look of beehive and weed infested steel on your lawn).
If your vehicle ends up totaled, despite your efforts to work with your insurance company, you will be given the “actual cash value” of the vehicle, based on an appraiser’s estimate. The appraiser has to consider the condition of the car before the accident, so unfortunately the “actual cash value” is probably not going to buy you a new car.
Totaled vehicles are not good for the driver, and not good for the insurance company. So drive safe and avoid accidents!
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