How do insurers determine a totaled car?

Problem: "My car was involved in an accident and was badly damaged. My insurance company has totaled my car but I don’t quite agree with their assessment. A body shop near my house gave me an estimate that is less than the value of the car. I had heard that when a car is totaled it either means that it is irreparable or the cost to repair it would cost more than the actual value of a car. I want to know how insurance companies determine whether or not a car is totaled.

                                    -Jamie Hudson"

Solution: Most companies have their own set standards by which they determine whether or not a car is totaled. It is true that a car is determined totaled when it is no more repairable or when the cost to repair the car exceeds its actual cash value (ACV).

You may not be satisfied with the way an insurer calculates the ACV. You may do your own bit of research since there can be several answers to insurance questions like “How do insurance companies determine a car totaled?” You will need an experienced and qualified mechanic to help you out with this. The basic process of finding out if your insurer has rightly assessed your car would be:

• Get an estimate of repair: Ask an experienced mechanic to give you an estimate of the amount that would be required to repair your car. The mechanic must also assess if the car can be repaired conforming to all road safety measures. If the value of repair exceeds the ACV of the car, and also if it cannot conform to road safety measures, it may be termed totaled.

• Check your policy: Your policy will state the percentage of the car’s value that must be exceeded by the cost to repair in order to be termed totaled. Some companies total a car at 51% of its actual cost while there are others who put the cut off at 80%. Find out what your policy states.

• Assess the ACV of your car: Most companies prefer to use the Kelly Blue Book, NADA and Black Book to calculate the market value of a car. You may calculate ACV in one of the 3 ways:

1. Subtract depreciation from replacement cost.
2. ACV may be calculated as ‘fair value’ which means the values at which a willing buyer and a seller would exchange a vehicle for in arms-length transaction.
3. Use the ‘broad evidence rule’ where a judge would decide the ACV based on ‘fair value’ and the replacement cost.

• Check cost to repair: Often your insurer would refer you to a body shop which will give you an estimate to repair your car. If you are not convinced, you may also visit body shops that you know of to seek an estimate from them.

Having followed the steps mentioned above, if you find that the cost to repair (if it is in a repairable condition) your car is more than the current value of your car, it will be rightly termed totaled by any insurance company.