After the accident happened, you knew it was your fault, so now comes the time to settle the accident with your auto insurance company. If the damages were bad enough, the insurance company might declare your car a total loss. What does this mean, though, and how do insurance companies make this declaration? Here are some things to know about total losses with cars and car insurance.
What a Total Loss Refers To
A total loss refers to getting in an accident that causes so much damage to your car that it is not worthwhile to make repairs to the car. The car is totaled. A car that is totaled is normally sent to a junkyard for parts and will have a salvage title. A car with a salvage title is hard to insure and title, and it is also much harder to sell. Experiencing a total loss of a car can be devastating if you do not have insurance on the car and if you caused the collision.
How This Is Determined
There are several methods used by insurance adjustors to determine if a car is considered a total loss. In most cases, an insurance adjuster will make this call by viewing two different things – the car's value just before the collision took place and the costs for the repairs. If the cost for repairs is equal to the car's value, then the car would automatically be labeled a total loss. If the repairs are close to the value, it might also be considered a total loss. To be close to the value, an insurance agent might use a percentage, such as 75%. This means if the repairs are equal to or higher than 75% of the car's value, they would consider the car totaled.
How Gap Coverage Helps
If you end up with a total loss, the insurance agency will settle the claim by paying the value of the car just before the accident. If you owe more than this, your gap coverage would pay the difference leaving you with a zero balance on your loan. Without this coverage, you would owe the amount of the difference between your car loan balance and the amount of the check the insurance company gives you.
Do you have the right coverage types on your auto policy? If you do not or if you are not sure, you should talk to an agent to learn more about the needs you have and the options the insurance company offers.