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How Does an Insurance Company Determine Whether a Car Is Totaled?

Posted on February 22, 2023 in

If you get involved in a car accident that results in damage to your vehicle, an insurance company may deem it “totaled,” or a total loss. This means the amount it would cost to repair the vehicle exceeds the value of the car. In this case, the insurance company would reimburse you for the pre-crash value of the totaled vehicle rather than paying for repairs.

Arizona Total Loss Law

The definition of a total loss changes from state to state. However, most states place the cutoff between 70 and 75 percent. This means that if the price of repairs equals 70 to 75 percent of the total value of the vehicle, it will not be worth repairing. Arizona does not have a specific percentage that it uses; instead, a vehicle is considered a total loss if its actual cash value is equal to or less than the cost of repairs plus the salvage value. 

Actual cash value is the worth of a car before it was damaged in an accident. The salvage value is how much it is worth in its damaged state, such as the value of its salvageable parts or scrap metal. If the price of repairs plus the salvage value of a vehicle is equal to or less than its actual cash value, it will be deemed “totaled” by an insurance company. 

For example, a car would be considered totaled if its actual cash value was $16,000, its salvage value was $11,000 and the estimated cost of repairs was $8,000. In this scenario, the equation would take the actual cash value ($16,000) and subtract from it the combined value of its salvage price and the cost of repairs ($18,000). In this example, the outcome would be -$2,000, making the vehicle a total loss. 

Is a Car Considered Totaled if the Airbags Deploy?

Not necessarily; airbag deployment alone does not render a vehicle a total loss. An insurance company will still take the proper steps to inspect the vehicle, obtain an accurate estimate of its repair costs and use the equation listed above to determine if the vehicle is a total loss. The misconception that airbag deployment automatically means a vehicle is totaled comes from the fact that an airbag will only deploy at a certain crash threshold.

Who Pays to Replace a Totaled Vehicle in Arizona? 

The answer to this question depends on who caused the accident. Arizona is a fault-based insurance state, meaning the driver or party at fault for causing the wreck will pay for the damage. The victim with a damaged motor vehicle must prove that the other driver caused the crash to qualify for coverage. If fault is proven, the at-fault driver’s property damage liability insurance will pay for the pre-crash value of the totaled vehicle.

Every driver in Arizona is legally required to carry at least $15,000 in property damage liability insurance. This type of coverage pays for the property damage of others after an accident, including a totaled vehicle. First-party coverage for your own property damage after a crash is optional. This includes collision and comprehensive coverage – insurance that would pay to replace your totaled vehicle if the damage was your fault or caused by something other than a car accident.

Can You Negotiate a Total Loss Payout? 

When a vehicle is deemed a total loss, an insurance company will write a check for the full pre-crash value of the vehicle. It is up to the owner of the vehicle whether or not to use this check to pay for a new car. It is possible to negotiate the value of a total loss payout if you believe you deserve a higher amount, such as for vehicle modifications or custom parts. A car accident attorney in Scottsdale can assist you with insurance settlement negotiations after a serious car accident in Arizona.