“Your vehicle is a Total Loss.” These phrases, most of the time, spark speedy controversy between an insured and their insurance coverage firm. The principal reason behind controversy between an insurance coverage firm and an insured because it pertains to complete loss is that most individuals really feel their car is value greater than it truly is.
A car, although traditionally not a superb funding, may be very private to us. Many of us spend an excessive amount of time in our automobiles every day and develop connected to our automotive. Many others ”trick out” their cars and inherently feel that their modifications enhance the value of the car.
I thought it might help some folks if they heard exactly how an insurance company views this and how they go about compensating you for your car should it be determined to be a totaled. There are typically two main things involved in understanding this process: What exactly is a Total Loss and how is the value of a car determined. In this article I am going to discuss and define a Total Loss from an insurance companies perspective.
So, what exactly does it mean when your insurance company deems your vehicle a total loss? In general, there are two types or measurements if you will when it comes to making this determination: Financial or Economic Total Loss and an Obvious Total Loss.
Financial or Economic Total Loss
A vehicle is often declared an Economic Total Loss when the cost of repairs exceeds the value of the vehicle, plus sales tax, less your deductible. I am sure you have heard that there is a percentage used to determine if a car is an Economic Total Loss. You have probably heard numbers from 50% to 70%, or more. This is true, however, it is important to know that not all states set an actual percentage and that for the states that do not set percentages, it is up to the insurance company to determine what that will be.
Although all insurance companies that are free to set this number themselves are all different, a common number you will hear is 70%. What exactly does that mean? I thought a quick illustration might help:
Market Value $15,000
Plus tax $ 1,050 (7% used as example)
Sub-total $16,050
Less Deductible $ 500
Total Loss Value $15,550
Cost of Repairs $11,662
Repairs are 75% of the value
In the example above, your insurance company would likely determine your vehicle to be an Economic Total Loss. One thing to remember is that if you are paid the value of your vehicle, the insurance company will retain the salvage or damaged vehicle and then sell it to a vendor. Most insurance companies have negotiated contracts with salvage buyers and will use that avenue to recoup some of the money paid out for the total loss. In the example above, your insurance provider would know that your car had a salvage value of $3,000 (example). So, when making their total loss decision, they would factor in this amount and subtract it from the total amount paid of $15,550, bringing their net cost to $12,550.
One other brief point to make that is worth noting is that your insurance carrier will also factor in estimated supplemental damages were your car to be repaired. From my experience as an adjuster and claims manager, there are often supplemental or additional damages/repairs identified once a car begins the repair process. These damages are often discovered on “tear down” or after elements of the car are eliminated and extra damages are extra seen. In many instances it’s nearly sure that there will probably be extra damages based mostly on the seen damages, nevertheless, an adjuster will solely write for what they’ll see and observe that extra damages are seemingly.
Obvious Total Loss
An Obvious Total Loss or OTL is during which the damages to a car are so in depth when it comes to restore and/or placing the structural integrity of the car in danger with a restore, that the automotive is set to be an OTL. Some examples of an OTL are:
- Fire Damage
- Rollover
- A theft
- Extensive Water Damage
- High influence front-end collision
- T-Bone or onerous hit to the aspect of a car on the center-point
In most instances, a claims adjuster is not going to have the direct authority to find out a car to be an OTL. The two insurance coverage corporations I labored for required a supervisor approval to make this name. With at present’s expertise, that may be finished simply within the subject by merely sending some detailed pictures to a Claims Manager or Property Damage Manager. In this case, there is not a value of repairs essentially however the valuation course of is similar.
Hopefully this helps you perceive what is supposed when you’re advised that your automotive is a complete loss. Your insurance coverage claims adjuster ought to clarify all of this to you, nevertheless, having a foundation understanding will definitely assist ought to you end up on this scenario.
