What Makes a Vehicle a “Total Loss?”

Car accidents can range from your casual “fender bender” to major head-on crashes. You can walk away from the scene with your vehicle only needing a few dents repaired to having your insurance company deem your vehicle a “total loss.” What’s a total loss?

When it comes to an accident, the first thing you’ll need to worry about is whether you or those around you, including your passengers and the other driver involved, are injured. Only once everyone involved is safe and secure will you need to concern yourself with getting your insurance company involved. They’ll be the ones to make the decision about whether your vehicle is deemed a “total loss” or not. There are a few factors that go into writing off a car. We’ll break them down for you:

Factor No. 1: Vehicle is worth less than it would take to repair.

When you insure a vehicle, you insure for what is known as the “actual cash value” (with the exception of a new vehicle purchase and the addition of an endorsement that removes depreciation on your vehicle for 2 years!) What is actual cash value? In the insurance industry, the actual cash value is a means of valuing the property that is being insured, which, in this case, is your vehicle. Actual cash value, unlike replacement cost value, is considered to be equal to the value of an identical vehicle, if taking into account its overall condition and kilometers.

With a used vehicle, or with a vehicle that cannot qualify for the insurance endorsement known as OPCF 43, your chances of having the vehicle written off are much higher. In fact, the older your vehicle is, the likelier it is to be written off in an accident. This is simply because it would take more to repair your vehicle than your vehicle’s current market value.

When an insurance company calculates the actual cash value of your car, they consider the type of vehicle, amount of kilometers, condition, and modifications. Don’t agree with the actual cash value of your car? You may have the chance to make an appeal. With enough evidence, you may be able to convince them to do a review. Just make sure that the evidence you provide is from a reputable source – i.e, a similar vehicle to the one you own that is listed for a higher price that’s being sold from a dealership.

Factor No. 2: Vehicle is unsafe to drive on public roads.

Even if your vehicle is shiny and new, it might not matter if the accident you were involved in was severe enough to deal damage worthy of making your fancy car unsafe to drive. In situations where a car is written off due to it being deemed “unfit” for public roads, there’s usually damages to the vehicle’s steering system, chassis, or to the physical frame itself. It might be easy enough to visually determine that a vehicle is no longer safe to drive, but sometimes a deeper assessment may be conducted to assess the vehicle’s performance. No matter what the cost is to do repairs, vehicles that are considered unfit for public roads are generally determined as total losses.

What do I do if my vehicle is deemed a total loss?

In the event your vehicle is deemed a total loss, your insurance company will reimburse you for the vehicle’s actual cash value (minus whatever applicable deductible). You can technically keep your “total loss” vehicle if you want, but you will be required to pay the insurer the amount they would receive for salvage. If you are currently financing/leasing your vehicle, the money that would be paid out to you will instead be paid to whatever financing/leasing company you had your vehicle through. Unfortunately, if the settlement is less than the amount you presently owe on your vehicle, you would need to pay out the remainder from your own pocket.

If you do lease or finance your vehicle, having gap insurance can help protect you from the difference you might owe if the total loss payment is less than your current outstanding loan. It isn’t mandatory, but it’s something worth considering if you made a down payment of less than 20% on your car when you first bought it or if you’re going to take more than five years to pay off your remaining loan.

In the meantime, how will you get around without a replacement vehicle? Endorsement OPCF 20 may provide you with a rental car until you can find another means of transportation. Unfortunately, without this endorsement, you’ll be left trying to find arrangements elsewhere. Note that every policy and every provider have their own limits when it comes to this coverage. You may only be able to borrow a rental vehicle for a period of 20-30 days before you would need to start paying for the temporary replacement out of your own pocket.

A “total loss” isn’t something we hope you ever have to experience, but if it ever does happen to you, then you can always ask Excalibur Insurance Group’s experts for advice.