By Dez Duran-Lamanilao

Insurance companies have the right to declare a vehicle as total loss. This is the time when they determine that it is no longer practical to complete repairs; and that the actual cash value (ACV) is already lower than the cost to repair the vehicle. When this happens, unfortunately for the owner, the insurer will only pay for the fair market value of the car as of the day of the accident.

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Below are the key factors to be considered before a car can be declared as total loss:

  • The car insurance company’s policies: While they need to observe state laws, it is still their prerogative to set specific standards for totaled vehicles.
  • The vehicle’s condition: Insurance companies will compute for what they call as the damage ratio or the total loss ratio, which is computed by dividing cost of repairs by ACV.
  • Individual state laws: Under Alabama law, when the cost of repair equals 75% or more of ACV, then the vehicle can be deemed as total loss.

You have the option to ask the adjuster to submit a valuation report if the valuation made seems too low. Review it in detail and do not hesitate to ask questions. Take note of possible errors in mileage, transmission type, and/or engine size as these can hugely influence the results of the report.

If you still think your insurance company is not treating you fairly, you may still invoke the appraisal clause in your policy or consult an attorney to help you decide wisely.

Now the question is do you want to keep your vehicle after an accident? You probably need to think it over because your insurer will still deduct the salvage value of the car from your claim payment, which by now would have dramatically decreased. Ask a third-party adjuster for opinion on whether this move is still feasible.

To avoid the inconvenience of having to deal with unnecessary stress and hurdles that may result from a car accident, ensure that your policy’s rules are clear from the start. More importantly, find an insurance company that can effectively meet your needs while also protecting their interests.