What Is Total Loss after a Car Accident?

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Getting in a car accident is a stressful situation. There are potential injuries to deal with, but also damage to the vehicle. When the damages are severe enough, your car is deemed totaled, meaning the insurance company believes it is unrepairable and a total loss.

After an accident, a driver will file a claim with the insurance company, their own or the other driver’s, depending on who was at fault. A police report helps prove negligence when the accident is not your fault, so always call the police and then get a copy of their report.

The insurance company will send out an adjuster to view the vehicle. Their job is to determine the type of repairs needed and the cost of the repairs. Often, they will declare the car a total loss. This means that the cash value of the vehicle is less than the cost of repairs. In other words, the vehicle is worth less than what it will cost to fix it.

How Do Insurance Companies Determine Total Loss?

Insurance companies work with local body shops to determine the cost of repairs. To determine the car’s current value, they use resources such as the Kelley Blue Book and National Automobile Dealers Association (NADA) criteria.

Once the insurer has determined how much the vehicle is worth and the cost of repairs, they need to ensure they follow the state’s requirements in determining value and expenses.

Some states use a total loss threshold (TLT) formula, in which damage only needs to exceed a certain percentage of a car’s value to be determined a total loss. About half of the states, including Maryland, use the TLF.

Under the TLF, if the sum of the cost of repair plus the salvage value of the car exceeds the car’s actual cash value, it is considered a total loss. Actual cash value is what the car was worth before being damaged.

What Happens after a Vehicle Is Declared a Total Loss?

Once the insurance company has declared the vehicle a total loss, they typically offer you a cash payout, minus your deductible if using your own insurer. The idea is that you can use the money as a down payment on another vehicle.

At this point, it is a good idea to step back and assess the situation. Ask yourself these questions, especially if you still owe money on the vehicle:

  • Is the insurer’s offer a fair value to you based on your car’s value?
  • Will the insurance payout cover the cost of what you owe on the vehicle?
  • Did the insurance company include the value of after-market improvements or additions you made to the vehicle? Give the insurer copies of the receipts for these parts and accessories.

If the insurer’s offer does not seem fair or you disagree that the car is a total loss, you can refuse the insurer’s offer and dispute the total-loss decision. It is at this point that many people find it helpful to hire a lawyer.

Lawyers are skilled negotiators who know how to overcome insurance company tactics. After all, insurance companies are in the business of minimizing their own losses, not covering all of yours. They generally will offer a modest amount that may not reflect the actual cost of your losses.

Note that your own collision coverage may first be used if your car is totaled in an accident caused by another driver. Your insurer would then most likely seek repayment from the other driver’s insurer. You could be reimbursed for the deductible in those cases. At any rate, always contact your insurance company after an accident, even if someone else was at fault.

What if the Insurance Payout Is Not Enough to Pay Off My Loan?

Everyone has heard that vehicles begin depreciating in value the moment they are driven off the lot. Unfortunately, that is true. A car’s value at any point in time rarely matches the amount owed on the car loan.

After a total loss, an ideal outcome is that the insurance check you receive will both pay off the loan and maybe even put a little money in your pocket. But suppose the check does not cover the loan amount. In that case, you are still legally obligated to continue paying your lender until the loan is paid off.

This situation is distressing for sure. A lawyer can potentially negotiate for a higher payout amount. It may be worth a consultation with a lawyer experienced in personal injury at the very least.

One important thing to know is that the check you receive from the insurance company will have your name on it along with the lien holder’s name. The lienholder is the bank, lessor, or finance company that loaned you money for the car. The insurance company must include the lienholder as a payee, as lien holders have the legal right to be paid first out of any total loss proceeds.

Some insurance policies include or offer gap insurance coverage. This coverage is intended to pay the difference between the insurer’s payout and the amount owed on the loan. A policyholder may also have new car replacement coverage, so knowing your policy coverage is always a good idea.

What Should I Do if My Car Is Declared a Total Loss?

When a car is deemed totaled, its title is transferred to the insurance company handling the claim, and they dispose of the salvaged vehicle. You or the claims adjuster will:

  • Remove license plates, if possible.
  • Gather personal items from the car if entry to the vehicle is feasible and safe.
  • Provide all keys and key fobs to the adjuster.
  • Complete needed paperwork
  • Contact the leasing company if you lease the car and your lender if you finance the car.

The insurance company will notify your state’s bureau of motor vehicles that the car has been totaled. In most states, the car is then declared salvage and can be purchased by salvage companies for its parts.

Sometimes a person may want to keep a totaled car for parts or sentimental reasons. Most insurance companies allow this.

Is a Car Automatically a Total Loss if the Airbags Deploy?

Not necessarily. The insurance adjuster will include the costs of replacing the airbags along with the cost of repairs in assessing whether the vehicle is a total loss.

How Can a Lawyer Help with a Car Accident Insurance Claim?

Although every case is different, in general, a lawyer can:

  • Communicate with the insurer, theirs or yours, depending on the situation.
  • Collect evidence regarding fault for the accident. This could include hiring experts for testimony.
  • Help collect and organize medical records, receipts, insurance and car repair correspondence, and related bills.
  • Ensure your doctors and other health care providers comply with information and documentation requests.
  • Build a solid case and present it to the insurer.
  • Negotiate with health, disability, Workers’ Compensation insurers, and other third parties for more favorable terms and outcomes.
  • Negotiate a satisfactory settlement with the insurer.
  • Take the case to court if a settlement cannot be reached.

Baltimore Car Accident Lawyers at LeViness, Tolzman & Hamilton Represent Those Involved in Car Accidents

A car accident can cause enormous physical and financial problems for those unfairly impacted by a negligent driver’s insurance company. If you have been involved in a car accident, do not hesitate to contact the Baltimore car accident lawyers at LeViness, Tolzman & Hamilton. We will assist you with every step of the claims process and ensure that you receive the financial compensation for which you are entitled for your injuries. We will continue to fight for you until you are completely satisfied. To schedule a free, confidential consultation, call us today at 800-547-4LAW (4529) or contact us online.

Our offices are conveniently located in BaltimoreColumbiaGlen Burnie, and Prince George’s County, where we represent victims throughout Maryland, including those in Anne Arundel CountyCarroll CountyHarford CountyHoward CountyMontgomery CountyPrince George’s CountyQueen Anne’s CountyMaryland’s Western CountiesSouthern Maryland and the Eastern Shore, as well as the communities of CatonsvilleEssexHalethorpeMiddle RiverRosedale, Gwynn OakBrooklandvilleDundalkPikesvilleParkvilleNottinghamWindsor MillLuthervilleTimoniumSparrows PointRidgewood, and Elkridge.