A car owner’s perspective on handling a totaled car

Your phone rings; it’s your car insurance company. Bad news they say, your car, that was in the shop after the recent accident, has been totaled (aka total loss). In addition, they want you to return the rental car within 5 days. The news makes your already horrible week worse. What next? Here’s a few key things to keep in mind. Disclaimer: this is not legal advice; we are not lawyers

Why was my car totaled?

Typically if the cost to repair the car exceeds 80% of the current market value, insurance companies prefer to just not do the repairs and payoff the car. They do include additional costs such as any rental cars they’re providing, salvage value in making the final determination.

Who owns the title to the car?

If your car was leased or financed, chances are your lender holds the title to the car. On paper, they are the real owner. However, you’re still on the hook to repay them full value.

How much will the insurance company pay?

Your insurance company will run a market valuation for the car to determine how much they’ll pay to your lender/leasing company or you (if you own the car or if it’s worth more than the loan or lease buyout). The valuation includes looking at comparable cars for sale in your area.

What if my car was a lease and the insurance company will pay less than what you owe?

You may have a GAP waiver built into your lease – this is your get out of jail free card. If you do, all you will owe is your insurance deductible. For most luxury car brands such as Infiniti, Mercedes etc. this is a standard part of the lease contract. Others such as Toyota sell it as an additional insurance option that you may have purchased. Bottom line – check your loan or lease contract OR call the finance company where you make your monthly payments to find if you’re covered. Hint: the finance company has nothing to do with the car dealer; they’re typically large corporations that fund leases. The name should be similar to the car make e.g. Infiniti Financial Services

Can I dispute the insurance payout?

Yes. In most states, you need to agree to the settlement amount before the insurance company can close the claim. Your best options are to compile a valuation of your car using kbb.com or edmunds.com like tools and use that to justify a higher amount. Also, take a close look at your insurance companies valuation and make sure they used the correct trim, options and features in the car listed. Insurance claims adjusters sometimes make mistakes in documenting the cars features that lead them to a lower value of the car.

What else can I negotiate?

Talk to your insurance adjuster about the rental car. Most adjusters have some sway in the process and can request additional days on the rental. In general, being on the good side of your insurance adjuster will make the process a lot more smoother for you.

Great! Any other advice

Stay in close contact with your insurance claims adjuster. Make sure they understand your situation i.e. if you need a rental car to get to and from work, or need time to get your car towed to a body shop etc.

Lastly, once you’re ready to move on to a new car, you can remove your old car from your policy starting the day after the accident. Insurance companies will give you credit for any remaining premium for your term. You may either use this credit towards a new car you add to the policy (typically within 30 days) or get a check in the mail for the amount. Be sure to check out our page on car leasing to learn how to score a sweet deal on a new ride!

How was your experience with your insurance company? Leave us a comment if you’d like to add any thoughts here!