Totaled Out: What Constitutes This Condition Under Your Car Insurance And What Happens Next

Posted on: 3 November 2018

You buy auto insurance, and you buy the maximum coverage so that you can get the most out of your insurance in the event that you are in an accident. That only makes good sense where cars and trucks are concerned. If you have recently been in a minor accident, you may be thinking that your auto insurance is not going to pay for repairs because of your deductible, but when you call for towing service, the insurance agent says you might be able to "total out" your vehicle.

Really? It is kind of a surprise, but there are actually specific guidelines insurance companies use to "total out" vehicles and cut you a check. Here is what typically constitutes this condition under the insurance company rules, and what happens next.

​The Vehicle Is Older Than Ten Years

Any vehicle that is over ten years old is going to have a very low value-to-repair ratio. This is a ratio that tells the insurance company what the vehicle is worth versus what the estimated costs of repair and restoration to the vehicle will be if you fix it. For example, say that your vehicle is only worth a thousand dollars (fair market value), and that the cost of repairs to the vehicle are going to be over a thousand dollars.

The insurance company does not want to fix it because it is not in their financial interests to do so. It makes better sense to them to cut you a check for the fair value of your vehicle, take possession of the vehicle, and let you go buy another car/truck. In almost all cases where the vehicle exceeds a decade in age, this is what typically occurs. There are only certain makes of vehicles where this does not happen.

The Damage Is Too Great

Of course, you could also have a newer vehicle, but the accident damage is too great. In this case, the cost of repairs still exceeds the value of the vehicle, even though the vehicle may be valued at five thousand dollars (give or take a couple thousand). When the cost of repairs is more than the vehicle's value despite the young age of the vehicle, the insurance company may still choose to "total out" your vehicle. If you would rather fix it yourself, the insurance company is not likely to approve your claim because of the amount of damage to the vehicle and their standing offer to total it out for you. In reality, it is more feasible and makes better sense to take a check for thousands of dollars and go buy another vehicle rather than spend an equal amount of money trying to restore this damaged vehicle you have.

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