Americans love their cars. They provide freedom at the turn of a key, allowing you to go anywhere at any time. When a beloved car is damaged in an accident, it is not only inconvenient, it is often upsetting.
Sometimes a car can be easily repaired after a fender bender, but other times the insurance company determines that it is more economical to scrap your car than attempt to get it back on the road. At Levin & Malkin, we regularly advise New Jersey residents who have been in a car accident and want to make sure their insurance company isn’t screwing them over.
What does it mean for a car to be “totaled?”
The term “totaled” is short for total loss. It is a way of saying that the cost of repairing the vehicle is greater than the actual cash value (ACV) of the vehicle. Actual cash value is the amount your vehicle would have sold for on the date of the accident, in whatever condition it was in before the accident.
So, a car worth $5,000 that suffered $8,000 worth of damages in an accident would be considered totaled.
Some states have laws that force insurance companies to consider a vehicle totaled if a certain amount of damage is done. In New Jersey, there is no specific threshold, but an insurance company will often total a vehicle if the appraised damages equal 80% of the vehicle’s ACV. The insurers have enough experience with car repairs to know that once repairs begin, the body shop is likely to find hidden damages that need to be fixed, which ultimately makes the actual repair costs more than the value of the car.
Who decides if my vehicle is totaled?
Whether you drive your car away from the scene, or it gets towed to a repair shop, state law requires you to make the damaged vehicle available for inspection by your insurance company before you attempt to repair it.
After evaluating the damages to your vehicle, your insurance company has the option of repairing your vehicle, replacing your vehicle, or reimbursing you for the vehicle’s actual cash value (ACV). If your vehicle is totaled, your insurance company will not repair it.
How will the value of my vehicle be calculated to determine if it is a total loss?
Each insurance company is required to select one of three prescribed methods for use in the settlement of all their total loss claims. The three methods which have been approved by the New Jersey Commissioner of Banking and Insurance are:
- Taking the average of the retail values of substantially similar vehicles as listed in the current editions of the “Automobile Red Book” (or “Older Car Red Book”) published by Penton Media and the “N.A.D.A. Official Used Car Guide” (or “N.A.D.A. Official Older Car Guide”) published by the National Automobile Dealers Used Car Company.
- Using a quote obtained by the insurer for a substantially similar vehicle available for you to purchase from a dealership within 25 miles of where your car is normally garaged.
- Utilizing the services of an approved source, including computerized databases that produce fair market values of substantially similar vehicles. At this time Audatex, Mitchell International and CCC are approved for use in determining fair market values.
If your vehicle cannot be valued using any of these three methods because they fail to represent a true cross-section of the market to determine the fair market value of your car, the company is then required to use the best available method and fully explain to you, in writing, how they calculated the amount they are offering you.
What happens if I owe the bank more than the car is worth?
If the ACV of your car at the time of your accident is less than the amount you owe the lender who financed your purchase of the vehicle, you may have to keep making car payments on your totaled car.
Can I keep my totaled car?
If you want to try to fix your car yourself, or sell it for scrap or parts, you can ask your insurance company to let you keep your vehicle. They do not have to let you do so, and they will deduct its scrap value from your settlement. You will have to re-title the car under a salvage title.
Here to Help
If you have been involved in a car accident, and you have questions about the insurance claims process, the Levin & Malkin team is here to help. Please contact us today to schedule an appointment.
Posted in: Car Accidents