So, you get into an accident and your "baby" is deemed to be a total loss by the insurance company. This happened to me in 2003 when my beloved Corvette was totaled by a young man late for class who ran a red light.
The first thing that you have to do is try to take your emotions out of the equation. You may have gotten married or had your first child while owning that car but nostalgia doesn't come into play and really, the insurance company simply tries to make a cold and calculated business decision regarding their payout. You will likely think you didn't get compensated with enough money. I certainly didn't.
The insurance adjuster puts some real effort in coming up with a fair settlement offer. He or she will look up the Kelley Blue Book value as well as shopping online for the exact (or as close as possible to the exact) make and model of your car with approximately the same mileage. They will take into consideration any repairs or updates that your vehicle had recently such as new tires, refurbished seats, etc.
The adjuster also reviews the shape that the car was in prior to the accident. For example, the car that I owned may have been in fantastic condition prior to the accident while the next car that came off of the assembly line could have been a piece of junk before the accident. It's only fair that the guy who took good care of his vehicle would be compensated more than the guy who trashed his car. This is a term used by the insurance company known as "betterment".
What determines whether a car is totaled or not?
Insurance companies are in business to make a profit. They may advertise that they are a "good neighbor" and they really will try to give you a fair settlement, but they are not going to pay out more than the car was worth just to be friendly. If the damage to your vehicle is more than the cost to repair the car (also taking into account legal fees), they will gladly write you a check to make you "whole" again and move on. And contrary to what some people think, the settlement offer will be fair as the insurance industry; especially in California is the most scrutinized industry by the local government. And another note….if the value of your vehicle is high enough to warrant the expense, the insurance company will aggressively go after the at-fault party or parties to be reimbursed. This is a term used by the insurance company called subrogation.
What if I decide to keep my totaled vehicle and have it fixed?
Many people decide to do just that but will receive less money from the insurance company. Why? Because when the insurance company takes the totaled vehicle, they can then defray their costs by selling the vehicle to a business which will then sell used parts from the car. You have the same ability to sell the car or pieces of it to make money. **Please be aware that once a vehicle has been deemed to be a total loss, the Department of Motor Vehicles will label it as a Salvaged Vehicle. If the car gets into another accident, the payout by the insurance company will be about half of what it would have been if it had not been labeled as a Salvaged Vehicle.
What if I disagree with what the company if offering me for my totaled car?
In this case, you may elect to go to arbitration. The way this works is two independent adjusters with no ties to any insurance company involved in the claim will try to agree on a fair settlement. If they cannot agree, a third independent adjuster will decide which adjuster is correct with their assessment and you contractually have to accept the decision.
My car is totaled and I gave it to the insurance company. Will they pay off my loan?
This one usually causes bad feelings with the consumer because the insurance company isn't responsible to pay off a bad loan. They are obligated to give you a fair settlement but you may still have the responsibility to pay off a loan on a car which you are no longer driving. To make sure this doesn't happen, many people will purchase GAP insurance either through the dealer or their insurance agent when purchasing a new car. This would cover the "gap" between the amount you received in a total loss settlement and the loan amount.