Auto Insurance
8 min read

How To Decide Whether To Total Or File A Claim On An Accident?

Published on
June 19, 2023

Understanding the ins and outs of car insurance can be challenging, especially when you're dealing with the aftermath of an accident. The decisions you make can influence your finances and what you drive on the road in a big way. This blog post will help you navigate these tough decisions and hopefully ease some stress if you find yourself in a horrible situation.

Understanding Car Insurance and Accident Claims

Trying to get an insurance settlement can be an important first step after being in a car accident. Not only does it help cover repair or replacement costs, but it can also set the stage for your next car purchase. You’ll need to know when it's helpful to file a car insurance claim and when you might be better off not doing so.

If your car requires significant repairs or someone's injured, it's usually best to file a claim. It's also recommended to file a claim when you've caused significant damage to someone else's vehicle. There are however, scenarios where filing an insurance claim may not be necessary. For example, if the damage is minimal and you're not at fault (e.g., only some paint got scratched off), or when your claim is less than the deductible.

What’s a Total Loss in Car Insurance?

Understanding the concept of a “total loss” is just as important when going through a claims process. In insurance terms, a car is considered a total loss when the repair costs are more than the car's actual value. In simpler terms, it's cheaper for the insurance company to replace your car than to repair it. Several factors are used to measure the value of your vehicle, including mileage, repair costs, and current market value.

Total Loss Formula

Insurance companies often use the Total Loss Formula (TLF) to determine whether a car is a total loss. This formula considers the cost of repairs plus the salvage value. If the sum is greater than the Actual Cash Value (ACV) of your car, the car is considered a total loss.

Understanding GAP Insurance: What Is It?

One important aspect of dealing with a totaled car is understanding GAP insurance.

If you're financing or leasing your vehicle, you should consider Guaranteed Asset Protection (GAP) insurance. This insurance covers the difference between the market value of your car and the remaining balance on your loan or lease if your car is totaled.

GAP insurance is a coverage that car owners can purchase to protect themselves from losing money if their vehicle is totaled or stolen. It covers the 'gap' between what you owe on your car loan or lease and what your car is actually worth.

How Does Gap Insurance Work After a Car Is Totaled?

When a car is totaled, standard insurance will only cover up to the vehicle's current market value. However, if you owe more on your loan than the car's market value, GAP insurance comes in to cover this difference, making sure you're not left with a hefty bill even after your vehicle is gone.

Remember that GAP insurance isn't a replacement for regular auto insurance. It's an additional coverage that works with your comprehensive or collision coverage.

Steps To Take When Your Car Is Totaled

When your car gets tagged as a total loss, it's important to know your next moves. First, you'll need to remove your personal belongings and the license plates from the car. You'll also need to sign over the title to the insurance company. In return, you'll receive a check for the Actual Cash Value of the vehicle.

Additionally, there are pros and cons to keeping a totaled car. It's vital to weigh these against each other and make the best decision for your personal circumstances. You can also explore the possibility of trading in a totaled car.

Dealing with a Total Loss Settlement

When dealing with a total loss settlement, you should know how to navigate disagreements with your insurer and understand the typical timeline for a total loss settlement. It's not uncommon to disagree with your insurer's valuation of your vehicle. If you believe your vehicle's value is higher than the insurer's estimate, it's within your rights to dispute (argue) the total loss settlement.

Start by collecting evidence of your vehicle's value. This might include recent receipts for new tires or major repairs, or any upgrades you've made that can increase the car's worth. You should also gather comparative prices for similar vehicles in your area to show that your car's market value is higher.

Then, present this evidence to your insurer. If you and your insurer can't agree on the total loss settlement, and your policy includes an "appraisal provision", you can open an appraisal process. This involves hiring an independent appraiser, to provide an impartial valuation. Your insurer will do the same. If the two appraisers can't agree, a neutral umpire will be hired to make a binding decision.

Remember, communication is key here. Open and polite discussions with your insurance adjuster can often lead to productive results. It's worth noting that this process can be time-consuming and potentially costly, so it's best used when the potential gain significantly outweighs the cost and time it takes to get it done.

Timeline for a Total Loss Settlement

The timeline for a total loss settlement varies depending on factors like the complexity of the claim, your insurer's procedures, and the regulations in your specific state.

Generally, once a claim is filed and the vehicle is considered a total loss, the insurance company will try to settle the claim quickly, often within a couple of weeks. You should receive payment soon after you and your insurer agree on the car's value.

If there are disagreements or delays, the process can take longer. It's important to keep in regular contact with your adjuster, provide any needed information quickly, and understand your rights according to your state's insurance regulations.

Strategies for Future Car Purchases

When you're ready to purchase another car after a total loss, it's beneficial to research used, upgraded models and compare different car models and brands. Remember, a in-depth comparison can save you money and get you a better vehicle.

When it's time to replace your totaled car, keep these strategies in mind to make a well-informed decision:

The benefits of buying used, upgraded models

Used cars can often give you more bang for your buck. A used car has already undergone most of its depreciation (loss of value), and yet can still provide you with many years of reliable service. For example, instead of buying a brand new standard model, you might be able to purchase a used, but higher-tier model with upgraded features for the same price. A 3-year old luxury sedan that's been well-maintained may offer more features and better comfort than a brand new economy car.

Importance of thorough research on multiple car-buying sites

In today's digital age, there are numerous online platforms that can help you in your car-buying process. Websites like CarGurus, Edmunds, Carvana, and Kelley Blue Book provide valuable information about vehicle specifications, reliability ratings, and pricing. They can help you understand the fair market value for a car you're interested in, making sure you don't overpay. For instance, if you're interested in a 2018 Honda Accord, these sites can provide you with a range of prices you can expect to pay based on the car's condition, mileage, and more.

Advice on comparing different car models and brands

When considering a new car, make sure you compare different models and brands. Each car brand and model has its unique strengths and weaknesses. For example, while Hondas are known for their reliability and fuel efficiency, a brand like Subaru might offer better all-wheel drive systems. Additionally, one model might offer better cargo space, while another offers advanced safety features. It's all about determining what’s most important to you. Websites like US News Best Cars offer comparisons and rankings of cars based on different categories, like safety, reliability, and interior quality, which can be quite helpful.

It’s Important to Know What to Do When This Happens

Navigating the process of filing an insurance claim and handling a totaled car can be complicated. However, armed with the right information and understanding your options can make the process smoother and less stressful. The next step is applying this knowledge to your situation, evaluating your options, and making the best decision for your circumstances.

Remember, it's not just about getting back on the road. It's about making financial decisions that serve you in the long run.


What Happens If a Car Is Totaled?

If your car is declared a total loss or 'totaled', your insurance company will pay you the Actual Cash Value (ACV) of your car before it was damaged. The ACV is calculated by subtracting depreciation from the replacement cost. The insurance company then takes possession of the totaled vehicle, and they may sell it to a salvage yard to recoup some of the claim payouts.

How Can I Get a New Car After Total Loss?

After your car has been declared a total loss, your insurance company will send you a check for the ACV of your vehicle. You can use this money as a down payment on a new car. If you had GAP insurance and you still owed more on your car loan than the ACV, the GAP insurance will cover the remaining balance, allowing you to fully pay off the old car loan and start fresh.

What Happens If My Car Is Totaled and I’m Not at Fault?

If your car is totaled in an accident that's not your fault, the at-fault party's insurance should cover the ACV of your vehicle. If the at-fault party doesn't have enough insurance, your own insurance's uninsured/underinsured motorist coverage, if you have it, can step in.

Does Liability Insurance Cover a Totaled Car?

Liability insurance only covers damages to other people's property. It doesn't cover damages to your own vehicle. Therefore, if your car is totaled, liability insurance won't cover it. You'll need collision or comprehensive coverage for damages to your own car.

How Much Does an Accident Devalue a Car?

The amount an accident devalues a car can vary, but on average, a car will lose 10–20% of its value after an accident. This is known as 'diminished value.' Certain factors can influence this, such as the severity of the accident, the car's age, and the quality of repairs.

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