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  • Writer's pictureA&M Auto Body Inc.

When Your Insurance Company Says It's a “Total Loss”

How total losses are determined, and what to do post-collision.

What if your insurer declares your car a total loss?

Every insurance company handles a total loss vehicle a bit differently regarding the decision process. One standard rule of thumb is if the vehicle repair costs are higher than a predetermined % of the vehicle's value (usually around 80%) then it’s declared a total loss. A&M Auto Body Inc. is in the business of auto body repair, which makes total losses less than ideal for us; however, we realize as an authoritative source on all things auto body, we need to provide helpful information on many different topics.

So, getting back to the % guideline, let's break it down. If your vehicle is worth $15,000 at the time of an accident and the standard 80% rule is applied, your car would be declared a total loss if repair costs would be higher than $12,000 (which is 80% of $15,000). If your vehicle is a total loss, then your insurer typically cuts a check for the vehicles valued amount which in our example is $15,000. If repair costs would be anything lower than $12,000, then repairs would be approved, and your vehicle would be sent to an auto body shop of your choice or one recommended by your insurance company.

How is my cars value determined?

Car values are dictated by the open market, not by the loan amount. Factors that go into determining value include mileage and the vehicle's condition. An industry standard resource to help establish a vehicle's worth is Kelley Blue Book.

What if you owe more than your car is worth?

As vehicles age, their value depreciates. Some people assume their car’s worth is the same as the amount they owe on their loan. While this is occasionally the case, most often it's not. Some people find themselves owing more than their vehicle is worth when they trade it for a newer vehicle. But what if you find yourself in this situation not at a car dealership, but instead on the phone to your insurance company post-accident?

Best case scenario after your vehicle is declared a total loss is that the check from your insurance company will be more than the amount still owed on the loan. In this case, after paying off the loan, you may be able to put the difference towards a new vehicle.

So what happens if your loan amount is larger than the check your insurance company cuts? Short answer: you’re still responsible for making loan payments to the lender until it’s paid off. This is when “gap” insurance helps out. Although this coverage is voluntary, gap insurance helps to pay the difference between a vehicle's worth and the remaining loan amount.

Can I keep my car and repair it myself?

Usually, a total loss vehicle is sent to auction, and insurance companies keep the sale money. There are some instances when a person wants to keep their damaged vehicle and attempt the repairs despite their insurance company’s recommendations. First, check your state laws regarding salvage vehicles. Typically your insurance company will get bids to determine fair market value and will deduct the amount from your settlement.

A&M Auto Body Inc.

From minor fender benders to major collision repairs, we’re your local auto body shop located in Lawrence, Massachusetts.


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