The Insurance Company Says My Car is a Total Loss -- What Now?

A look at the vehicle damage claim process and your options if you disagree with the insurance company's valuation of your car.

If you are making a vehicle damage claim after a car accident, and the insurer says that the car is a total loss, what happens next? What happens if you disagree with the insurer's valuation? Does it matter which insurer you are dealing with -- yours or the other driver's? Let's take a look at these and some related questions.

Whose Insurer Will Pay for Vehicle Damage?

The first question is which insurer will pay for vehicle damage, your insurer or the insurer of the person who hit you. The answer to this question depends on whether the accident occurred in a no fault state or a non-no fault state and what type of coverage is being used to pay for your car.

No-Fault Versus Standard Liability Insurance

No-fault car insurance means that the insurer will pay for certain damages regardless of who was at fault (and regardless of whether anyone was at fault). But in some no-fault states, vehicle damage claims are not subject to no- fault rules, meaning you're free to pursue a claim against the driver who hit you.

And in any traditional fault state, liability in car accidents will always be based on negligence. This means that insurers will only pay for vehicle damage if someone was at fault, unless you have insurance coverage that will pay for vehicle damage regardless of fault, such as collision coverage, which we'll discuss next.

Collision Coverage

Collision coverage is supplemental insurance coverage that covers any and all damage that your vehicle sustains in an accident. Collision coverage can be pretty expensive, since it pays for vehicle damage regardless of who caused the underlying accident. You can make a claim against your own insurer's collision coverage if you get into an accident that is your fault.

Who Pays: The Bottom Line

The bottom line is that, if your car accident occurred in a non-no fault state, the other driver's insurer will only pay for your vehicle damage if the other driver was negligent. If you were negligent, and the accident occurred in a non-no fault state, the only way any insurer will pay for your vehicle damage is if you have collision coverage.

Remember that if the accident occurred in a no-fault state, rules vary when it comes to vehicle damage claims, so you should check your state's laws or consult a lawyer in order to determine which insurer is required to pay for your property damage.

How Much Will the Insurer Pay?

Insurers will only pay damages up to the policy limits. For example, if the other driver was at fault and caused $25,000 of damage to your car, but he/she only has $10,000 of property damage coverage, his/her insurer will only pay $10,000 toward your repair costs. Insurance-wise, the only way for you to get the remaining $15,000 of repair costs would be from your own collision coverage, if you have it.

What If the Insurer Says My Car is a Total Loss?

If the insurer says that your car is a total loss, it will only pay you the fair market value of your car as of the day of the accident. Unfortunately, an insurer is only required to pay damages up to the fair market value of the destroyed property, even if you owe more than the car's value on your car loan. Let's look at an example of how this happens.

Let's say that, on the day that the car was totaled, you owed $14,500 on your car loan, but that the current fair market value (i.e., the Blue Book value) of your car was only $12,000. The insurer is only going to pay you $12,000 toward the value of the car, leaving you with $2,500 to pay on your car loan, even though you no longer have a car. Learn more: My Car Was Totaled But I Still Owe Money On It.

Further, if an insurer declares your car to be a total loss, the insurer has the legal right to take your car so that it can sell it on the secondary market and recoup some of its losses. It is possible to convince the insurer to let you keep the car, but it's not likely. The insurer has the absolute right to take a totaled car, and it almost always does.

What If I Disagree with the Insurer's Valuation of My Damages?

If you disagree with the insurer's valuation of your damages, your only real options are to accept it, try to negotiate further with the insurer about the figures, or file a lawsuit.

Regardless of whether you want to negotiate or sue, you will need to have some basis for disagreeing with the insurer's figures. You will need hard evidence that the car was worth more than what the insurer said it was worth. You will need two types of evidence: evidence as to exactly what type of shape the car was in, and evidence as to the car's actual value.

The best way to prove the car's actual condition is reasonably current photographs of the car. If you generally have reason to think that your car is worth more than its Blue Book value because you have done some serious upgrades and work on it, you should get into the habit of photographing your car regularly. That way, you can always prove what your car looked at any time.

The best way to prove a car's actual value is through the opinion of a qualified appraiser. If you disagree with the insurer's valuation of your car, you are going to need to hire a qualified appraiser to come up with an opinion as to your car's value. Simply going online and trying to use an online car value calculator won't be good enough. You are going to need actual live testimony from a qualified expert.

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