My Car Was Totaled and I'm Not at Fault: Now What?

You drive reasonably. You come to a full stop at intersections, always use your turn signals, and obey speed limits scrupulously. Despite your caution, you may still be in an accident because of another motorist's actions. What happens if someone else's negligence results in a car accident that totals your motor vehicle? The following article provides an overview of the process and potential issues following such an auto accident.

Determining a Total Loss

After exchanging phone numbers and other contact information, the first step following an accident is to file an auto insurance claim with the at-fault driver's insurance company. You should also file a claim under your own insurance policy and ascertain whether you have collision coverage subject to any deductible. The documentation included in your insurance claim — which should ideally include your out-of-pocket expenses, an appraiser's report, and any medical bills — should be carefully assembled to ensure that you are fully compensated.

For example, there are situations in which the Kelley Blue Book value of your vehicle alone may not account for the full value of the vehicle and property damage. Modifications, such as an improved stereo system or recently replaced tires, might impact the actual cash value of your car. By providing comprehensive information to support your claim for reimbursement against the liability insurance company, you can increase your chances of maximizing your payout from liability coverage.

Alongside a police report (if available), the insurance adjuster will use this information to determine the vehicle's value before your accident. Your own insurance company will assist you during the claim process, communicating with the at-fault party or their adjuster to determine the dollar value of the insurance claim. This number is then compared to the cost of repair.

A total loss is declared by the car insurance company when the cost of repair amounts to a percentage of the total value that is set by the insurer. This percentage is constrained and varies by state laws, which frequently require a declaration of complete loss when damages are about 70% or more of the total value of the vehicle. The insurer may set a higher percentage than the state (but not a lower one) in reaching this determination.

After a Total Loss is Determined

When a car has been totaled, the insurer must compensate you for the determined value of the vehicle prior to the accident. They won't replace your car or guarantee that the vehicle's pre-accident value will be enough to purchase a replacement. You cannot, in most situations, keep the wreck to sell or use for parts.

By accepting a settlement payment, you agree that the insurer will take possession of the totaled car. They will then sell it to a scrap yard or repair it and put it back on the market as a salvage-titled vehicle. However, it may be possible to negotiate with the adjuster in order to keep your totaled vehicle.

Ultimately, your claim results depend on whether you and/or the at-fault driver have comprehensive coverage or insurance that covers the nature of the damages relevant to your particular situation.

Potential Issues

Several potential issues can arise when a car is totaled and you are not at fault. For example, an insurer's value estimate of the wrecked vehicle may seem too low. Following an offer by an insurance adjuster, you may send a reply that includes arguments and evidence for a higher estimate of the vehicle's value. This may result in an adjustment, but if the insurer is unwilling to value the vehicle properly you may need to sue them in civil court.

A problem may arise if the totaled car had been purchased with a car loan, and the amount outstanding on the debt is greater than the insurer's estimated value. In this circumstance, unless you have gap insurance coverage, you may find yourself paying for the car that was totaled through no fault of your own. Unfortunately, the car's destruction doesn't alter the loan agreement. As such, your only recourse may be to argue for a higher value on the vehicle.

How Do I Get a Rental Car After a Total Loss?

One key concern following a total loss accident is the question of transportation. You'll need a vehicle to get to work, run errands, and continue with your daily life. Many auto insurance policies include rental car coverage, which pays for a rental car while your claim is being processed and you seek a new vehicle. Check your policy or talk to your insurance agent to understand the specifics of your coverage.

What Is a Salvage Title? What Is Salvage Value?

When an insurance company declares a car a total loss, the vehicle's title is typically replaced with a salvage title. This title indicates that the car has been damaged severely—typically in a flood or accident — and that repairs to the vehicle would be greater than or near the car's value before the damage occurred.

The salvage value is the estimated worth of the totaled vehicle as is. Insurance companies often sell these vehicles at auctions to recoup some of their costs. If you decide to keep your car after it has been totaled, your insurance payout will be reduced by the salvage value.

Assessing Fair Market Value and Your Car's Actual Cash Value (ACV)

The fair market value of your car is the price that a willing buyer would pay to a willing seller, assuming both have reasonable knowledge of the facts. It's typically the basis for an insurer's payout on a totaled vehicle.

The Actual Cash Value (ACV) is the fair market value of the car minus depreciation. Insurance companies use the ACV to determine payout amounts for total loss or property damage liability claims. The ACV may also be used if your car is stolen.

Buying a New Car After a Total Loss

After your insurance company has paid out the ACV of your totaled car, you might be in the market for a new vehicle. If you had an auto loan on your totaled vehicle, the insurance payment would first go to your lender. If your car's ACV exceeds what you owed on the loan, you can use the surplus towards a down payment on a new car.

It is important to review your financing options when purchasing a new car. These might include traditional auto loans, leasing, or even personal loans. Compare interest rates, loan terms, and monthly payments to ensure you get the best deal. Remember, just as your insurance company used factors such as make, model, age, mileage, and condition to determine the ACV of your totaled car, these same factors will impact the cost and financing of your new car.

The Total Loss Formula

Insurance companies use a Total Loss Formula (TLF) to determine whether it's more cost-effective to repair a vehicle or declare it a total loss. The TLF is calculated as the cost of repairs plus the salvage value. If that number equals or exceeds the car's ACV, the car is considered a total loss.

How to Handle DMV Issues After a Total Loss

After your car has been declared a total loss, there are several DMV-related steps you'll need to take. These include transferring the title to the insurance company if you've accepted a total loss payout, canceling your registration, and turning in your license plates.

Transferring Title to the Insurance Company

Once you've accepted a total loss payout, the insurance company will typically take ownership of the damaged vehicle. This means you'll need to transfer the car's title to them.

First, contact your local DMV office. You can also visit their website for specific procedures and requirements for transferring a vehicle title.

You will likely need to complete a title transfer form. This usually requires information such as the vehicle identification number (VIN), the odometer reading at the time of the accident, and the name and address of the insurance company.

Sign and date the title and give it to your insurance company. You might have to do this in the presence of a notary, depending on your state's laws.

Canceling Your Registration

You should cancel the registration of a totaled vehicle. This allows you to avoid liability for any future tickets, toll violations, or crimes associated with the car.

Contact your local DMV office to determine the process for canceling your vehicle registration. This often involves submitting a cancellation form and providing proof that the vehicle is no longer in your possession (for instance, a copy of the title transfer).

Some states may require you to surrender your vehicle's license plates before canceling the registration.

Turning In Your License Plates

After canceling your registration, you must usually turn in your license plates to the DMV. This procedure varies by state.

Check your state's DMV website or contact them directly for specific instructions.

In some areas, you can mail your plates to the DMV. Otherwise, you must bring them to a DMV office in person.

Remember, this is a general guide. The process may vary slightly depending on your specific circumstances and local laws. Always verify with your local DMV or a legal professional to ensure you follow the correct process.

If Your Car Was Totaled, Get Help From a Car Accident Lawyer

When your car is totaled and you're not at fault, it may feel like you shouldn't have to do much to get compensated. However, insurers are crafty. They employ an army of professionals to help them protect their rights and avoid payouts wherever possible. Contact a local car accident attorney to discuss how you might be helped by having professional assistance of your own.