After a wreck, your first concern has to be your health – but that doesn’t mean you can’t also be worried about what’s going to happen with your vehicle.
Your car doesn’t have to be an obvious pile of scrap for an insurance company to “total it out” or declare it a total loss. Even though a car can still run or seems repairable, an insurer may decide that the cost of repairing it is more than the vehicle’s total worth.
That can create a whole new set of problems for you. It’s difficult to go without reliable transportation for long and you may still owe money on the car that has to be paid. You have no idea whether the insurer’s offer regarding the vehicle is fair. Understanding how the total loss process works can help you protect yourself from accepting less than your vehicle was worth.
How does the insurance company value your vehicle?
A total loss settlement is generally based on the vehicle’s actual cash value immediately before the wreck. The insurer generally looks at the car’s make, model, year, mileage, upgrades, accident history and overall condition and resale value.
Actual cash value is not necessarily what you originally paid or what it would cost to buy a brand-new vehicle. However, the insurer should consider what a comparable used vehicle was worth before the collision. In Tennessee, applicable sales tax should also be included in a total loss settlement.
You do not have to assume the insurance company’s first calculation is correct. Ask for a copy of the valuation report and review the vehicles used as comparisons. You may be able to support a higher value with maintenance records, photographs, receipts for recent improvements and listings for comparable vehicles in your area.
What if you still owe money on the vehicle?
The insurer ordinarily pays the lender first because the lender has a financial interest in the vehicle. If the settlement exceeds the loan balance, you receive the remainder.
If you owe more than the vehicle is worth, however, you may remain responsible for the difference.
Guaranteed asset protection, commonly called GAP coverage, may cover some or all of that shortfall if you purchased it.
Remember that your property damage claim and any claim for physical injuries are separate, but make sure you understand exactly what you are agreeing to before you sign anything. An experienced attorney can help you navigate the entire process.