You’ve just been informed by your insurance carrier that your car has been totaled. What does this mean? Can you keep your car? Is it still possible to have the damage repaired? If your car cannot be repaired, what can you expect to receive from your insurance carrier to replace your vehicle? Although the answers to these questions may vary depending on your individual situation, it’s important for you to know what to expect and to understand the options you have as the owner of a totaled vehicle.
What You Should Expect
You’ve already reported your claim and had the claims adjuster inspect your car and arrange a rental for you. Now you’ve learned that your vehicle is a total loss and it’s time to review the settlement. Typically, you’ll need to locate your vehicle title, gather your personal belongings from the car and release your vehicle. After signing the required paperwork, you’ll receive a check from your insurance carrier. Sounds easy enough, but what if you’re not satisfied with the offer from your insurance carrier and you want to keep your car?
Options You May Have as the Car Owner
You may not have many options if you have a current loan on your vehicle. Your bank or lending institution (the lienholder for the vehicle) will require payment in full for the loss of your car. If the settlement offer you receive is less than what you still owe on the loan, then you will be responsible to pay the difference. For example, if you still owe $7,000 on your car loan, but your vehicle has a fair market value of $5,800, your insurance carrier would pay the $5,800 toward the car loan (minus any required deductible from you) and you would be responsible to pay the $1,200 difference, plus the deductible. Having an outstanding loan balance on a vehicle on its way to the junkyard is not an enviable position to be in, though it is a common occurrence. Likewise, if you lease your vehicle, you’re still required to make the monthly lease payment, or the amount equivalent to all outstanding lease payments in order to end your lease. Totaling a leased vehicle doesn’t void the lease contract.
If you hold the title to your car and own it outright, you have the option to accept or reject the offer from your insurance carrier for the actual cash value of your vehicle. If you decide to reject the offer from your insurance carrier and keep your damaged vehicle, your carrier will notify the New Jersey Motor Vehicle Commission that your car has been totaled. You will then be required to obtain a “salvage title” and will not be permitted to operate your vehicle on the road until repairs have been made, and a NJ state official fully inspects your car. You will also be required to fully disclose that your car was involved in a total loss accident and that you have maintained a salvage title if and when you decide to sell your vehicle in the future. The insurance company will still issue a check for the repair amount or the actual cash value of the vehicle, whichever is less, but the amount will most likely be reduced because you are keeping the vehicle.
What Constitutes a Total Loss?
When the cost to repair your car exceeds its actual value, your insurance carrier will determine that your vehicle is a total loss. Depending on the severity of the damage, you may already know that your car was going to be deemed a total loss. However, if you’re driving an older vehicle, you could be surprised to learn your car is totaled. Even minor damage repair costs may still be enough to outweigh the current market value of your vehicle. For example, if the value of your vehicle is $3,500 and the cost of repairs is $4,000, insurance will determine your car is a total loss. Also, an insurer may deem the vehicle a total loss even if the cost to repair is less than the value of the vehicle, but within a certain percentage of the vehicle’s value. Many times a vehicle has “hidden” damage not evident on initial review, so it may be more efficient to deem a vehicle a total loss when the obvious repairs are, say 80%, of the current value.
How Does Insurance Determine Your Car’s Value?
Every vehicle on the road has what is called a “fair market value.” The value of your car is generally determined by factors such as year, make, model and mileage. Your insurance carrier will consider the value factors and will make you an offer based on the determination of your vehicle’s actual cash value. It’s important to keep in mind that you will need to have carried collision coverage on your auto policy in order to have coverage for a total loss accident that you caused. If your totaled vehicle is a result of damage caused by vandalism, fire or hitting wildlife, you will need to have carried comprehensive coverage in order to receive an offer from your insurance carrier.
Still Have Questions About Your Car Insurance?
Deciding what to do after a total loss isn’t always easy. For expert advice on car insurance, you can rely on a Plymouth Rock licensed agent. We’ve been helping NJ drivers understand their options and coverages for nearly 40 years. Plymouth Rock also offers New Jersey motorists and homeowners an array of exclusive discounts for which you may qualify. Contact Plymouth Rock Assurance today to get the coverage you need and service you deserve!
Plymouth Rock Assurance® and Plymouth Rock® are brand names and service marks used by separate underwriting, managed insurance, and management companies that offer property and casualty insurance in multiple states. Insurance in New Jersey is offered by Plymouth Rock Management Company of New Jersey on behalf of High Point Property and Casualty Insurance Company, Palisades Insurance Company, Palisades Safety and Insurance Association and their affiliates. Each company is a separate legal entity that is financially responsible only for its own insurance products. Actual coverage is subject to the language of the policies as issued by each separate company.