February 22, 2017

When is a Car Considered Totaled?

by Vikas Bajaj

If you are a resident of San Diego, have been in an auto accident, and are now being told your vehicle is totaled, you may have many questions about what happens once your car is declared a total loss. California operates under a total loss formula (TLF). The TLF states that the amount for repairs, added to the vehicle’s scrap metal value, must be equal to the pre-accident value of the vehicle. If so, then the insurance company can choose to “total” the car.

Insurance Companies May Not Be Looking Out for Your Best Interests

The fact is, following your automobile accident, your insurance company will not decide whether to total your car based on whether you can afford a new car or even your sentimental attachment to your damaged car. Instead, your insurance company will look for the cheapest option—for them.

The most the insurance company is liable for under state law is the actual cash value of the vehicle at the time of the accident. With this in mind, an appraiser from your insurance company will carefully examine your vehicle, taking into consideration the make, model, year, condition, mileage and added options, the car’s pre-accident cash value, and the cost to have the car repaired.

Although there is a formula for totaling a vehicle, in some cases an insurance company which operates across many different states may total a vehicle that falls under the California threshold.

Remember—if you are not happy with the total loss amount your insurance company offers, you can challenge that amount. In most cases, a challenge will bump the number up by about $500, but if you believe your car’s actual cash value is significantly more than the insurance company is offering, you may have to hire an independent appraiser to back up your assertion.

What if You Want to Keep Your Vehicle?

If you want to keep your vehicle, the state of California does allow that (some states do not), with a few caveats.

Your car now has a salvage title attached to it, and even if you end up repairing it to a drivable condition, you may find it more difficult to insure.
You will be required to exchange your title for a salvage certificate at the California Department of Motor Vehicles. At this point you could decide to sell you vehicle to a salvage company for parts, or to a car dealership which buys salvaged vehicles, repairs them and re-sells them. You could also decide to repair your vehicle and continue driving it.
Once your salvaged vehicle is repaired, inspected, and deemed street-worthy, you can exchange your Salvage Certificate for a title, which is known as a Revived Salvage title.

At this point, you are allowed, under California law, to be re-register your vehicle. Your first inspection prior to re-registration will verify that the components used to repair your vehicle were legally purchased. You can have this inspection done at your local California DMV or Highway Patrol station.

You will also need a brake and lights inspection certificate, performed by a service station or auto repair shop certified to provide such inspections. If your vehicle was originally equipped with airbags, you will be required to have the airbags reinstalled.

Additional Issues Associated with a Totaled Vehicle

Some insurance companies now offer Guaranteed Replacement Cost coverage for new cars, which means the insurance payout after your accident will cover the cost of a new car. If you don’t have this type of coverage, the insurance company is only required to consider the actual cash value of your vehicle, minus your deductible, which might result in enough to buy a car similar to your old one, but it is unlikely you will be able to get a car that is equal in value.

If your vehicle is financed, then your finance company will receive the balance you owe them, and the remainder, if any, will go to you. If the settlement amount is less than what you owe the finance company, you will be responsible for paying the remainder of the loan balance. If your car is leased, the full amount will be paid to your leasing company. If you own your car, then you receive the check.

If you believe your insurance company is simply not offering you the amount of money your car is worth, it could be beneficial to speak to a San Diego attorney who can speak to the insurance company on your behalf, making sure your rights are protected during the entire transaction. Having someone in your corner can also be comforting during a time when you feel like nobody is looking out for you or your interests.