What To Do When Your Vehicle Is A Total Loss
Being involved in a car accident can be a scary situation. It's even scarier when you realize your car has become a total loss. A total loss is when the cost to repair the vehicle to its pre-damaged state exceeds the cost of the vehicle's current value. For example, if your car's fair market value is 20k and the damages caused by the accident exceeds the 20k your car is worth in repairs.
There are a few things you should remember if you're involved in a total loss accident to save yourself some out of pocket costs. It is very important that you understand that if your car is taken to a storage facility, such a tow yard or body shop, they will charge you a daily fee while your car is just sitting there. If your car is at a tow yard, report the location on the vehicle immediately to your insurance company so they can move the car, if you have collision coverage. If you only have liability coverage, arrange to move the car out of the lot yourself as soon as possible. If the car is that the body shop and you are notified that your car is a total loss, make sure you find out from your insurance company if they will be covering the storage charges. If they investigating coverage or liability, it will take some time for them to make you an offer on your vehicle. Make sure you move the car to a storage free location. Keep all your receipts so when coverage is granted or liability is accepted, you will be reimbursed. If you don't take any action, the storage facility may put a lien on your vehicle. To avoid these costs, you can store your car at your house or a friends house. Unreasonable storage facility costs will not be covered by your insurance provider.
At this point, you might need a rental vehicle in the meantime to get around. Most insurance companies will only reimburse your rental car only if it is a reasonable replacement. For example, if your current car was Toyota, your rental car will not be covered if it is a Mercedes. You also want to make sure you are getting your rental vehicle from a registered rental company. On the flip side, if you opt to not get a rental vehicle, you may file for a loss of use and receive compensation for the time you were left without a vehicle.
Next thing you want to do is figure out the fair market value of your vehicle. This can be done in many different ways, but the most common would be to check the Kelly Blue Book Value with your vehicles specifications and milage. Insurance companies pay actual cash value. They determine this price by looking at local listings. You can also check local listings of similar vehicles to get a better understanding of what your car's value is. At this point, you will have done enough research to know if the insurance companies offer for the vehicle is within the same ballpark of the market value.
A very important note is to opt in for Gap Insurance. So lets assume your car is damaged beyond repair and needs to be replaced. You still owe $15,000 on your auto loan, but your car's fair market price is only $11,000 (this is sometimes referred to as being “under water” or “upside down” on your loan). If you have gap insurance, it can help you cover the $4,000 gap between what you owe on your loan and what your car is worth, after your deductible. Not all drivers need gap insurance, but it may be of importance if you are leasing a car or currently making payments on your vehicle.
Most companies will issue payment within a few days of finalizing the actual market value. If you leased the car, payment goes directly to the leasing company. If you financed the car, the payoff amount goes to the finance company or bank and you get the rest. Of course, if you owned the car yourself, you get the full check.