If you’ve been in a car accident, there’s a likelihood that your vehicle is considered a “total loss.”
However, despite seemingly negative terminology, a car deemed a “total loss” isn’t necessarily bad. Writing off a car as a “total loss” could help save your insurance company money and get you back on the road faster with an insurance payout.
If you disagree with your insurance company about whether your vehicle is totaled, an experienced auto insurance company claims attorney like those at the Stone Rose Law firm can help you negotiate with insurers.
Car insurance companies declare a car a total loss based on the principle of “the point of diminishing returns.” This principle states that the car’s diminished post-accident value justifies the repair costs under the insurance policy.
In addition to a basic value-based calculation, your insurer can decide whether your vehicle’s fair market value has passed the point of diminishing returns in several ways.
One is whether your vehicle will be safe enough to drive with a salvaged or rebuilt title, even if repaired. Please note that a “salvaged” or “rebuilt” title WILL affect the marketability and resale value of the vehicle, possibly making it more expensive to insure.
The other is whether your state’s method of assessing your vehicle’s post-collision value dictates the insurer’s decision about how much to pay.
Auto insurance companies use one of two methods to calculate whether your car is worth repairing. One is the total loss threshold, and the other is the total loss formula. The method your insurer uses depends on the laws of the state you live in.
The total loss threshold (TLT) is when an insurance company considers a vehicle a total loss.
Some state laws require insurers to use a specific percentage of your car’s fair market value to determine if it’s a total loss. Some states set this percentage, while in others, insurers can establish their own thresholds. Arizona does not have a specific percentage that it uses. Instead, a vehicle is considered a “total loss” based on the Total Loss Formula (see below).
If the cost to repair your car is more than the threshold percentage, your car is considered totaled.
For example, let’s assume that your car’s fair market value before the accident was $10,000 and that your state has a 70% total loss threshold. 70% of $10,000 is $7000. So, if the repair cost of more than $7,000, this exceeds the total loss threshold and your car is considered totaled.
In some states, instead of using a total loss threshold, insurance companies can decide if a car is totaled based on its salvage value and whether it’s uneconomical to repair.
Arizona is a state that uses the total loss formula. According to ARS 28-2091(c)(3), a “salvage vehicle” has been “…stolen, wrecked, destroyed, flood or water damaged or otherwise damaged to the extent that the owner, leasing company, financial institution or insurance company considers it uneconomical to repair the vehicle.”
This is the value of your car on the day of the accident but before it occurs. Your car’s actual cash value is not the same as its replacement value. In most if not all, cases, its actual value will be less than its replacement value.
Insurers use various sources to calculate the actual cash value of a vehicle. These include, but are not limited to, any or all of the following:
The salvage value of the car is its post-accident value.
When it calculates the salvage value of your car, your insurance claims adjuster considers multiple factors. These include:
Now that we understand what your insurance adjuster considers, we can lay out how the total loss formula works in five steps:
If the combined cost of repair and salvage value is more than the car’s actual cash value, then the wrecked vehicle is considered a “total” loss or “totaled.”
Example: If your car’s actual cash value before the accident was $10,000, its salvage value after the accident was $4,000, and its estimated repair costs are $7,000, then the combined salvage value and repair costs ($4,000 + $7,000 = $11,000) exceed the actual cash value of $10,000 by $1,000. Thus, under the total loss formula, your car would be a totaled or salvaged vehicle.
You may be wondering what input you have on the insurance company adjuster’s decision whether to decide that your car is totaled. Here are some common questions car owners ask and their answers.
The short answer to this question is, “Maybe.” In Arizona, the salvage vehicle statute includes “owners” as among those who can decide whether it is uneconomical to repair a vehicle. On the other hand, if you file an insurance claim after an accident, your insurer will take the lead in applying the total loss car formula.
If you believe that the insurance company has not fairly determined what your vehicle’s actual cash value is, you can present your own actual cash value evidence to the insurer to get it reconsidered.
The kinds of information that may be persuasive to the adjuster include:
Providing this information may not prevent the insurance company from concluding that your vehicle has been totaled. However, it could affect the amount of your insurance claim settlement payout in your favor.
If you disagree with the insurer’s settlement amount for your auto insurance claim for a totaled car, you still have some options to challenge its decision.
When challenging an insurance settlement, an attorney experienced in negotiating with insurers can help you reach a more favorable final settlement.
Negotiating an insurance settlement for a totaled car can be challenging. At Stone Rose Law, our Phoenix auto accident attorneys serve car accident clients throughout Arizona. We zealously represent your interests throughout the claims process to ensure you receive the insurance compensation you deserve, including settlement value for your car if it is totaled.
Reach out to us online or call (480) 498-8998 to schedule your free consultation to discuss your car accident insurance settlement with a qualified car accident lawyer in Phoenix, Chandler, Scottsdale, or throughout Maricopa County to be sure you receive the best possible legal representation from an experienced Arizona personal injury law firm.
If your insurance company has denied your policy claim after you are in a car accident, call us. Or, even if you are unsure of what to do after getting into a car accident and have a question about your legal rights in a personal injury case, call us.
Do you prefer to communicate with us online? You can reach us here to schedule a free initial consultation or to ask a question to one of our dedicated Phoenix car accident lawyers.
Remember, when you need to make an insurance claim after a car accident, your insurance company is no longer your friend. Its interest is in keeping your insurance settlement value as low as possible. A Stone Rose Law Arizona car insurance and car accident attorney on your side can make sure your interests get effective legal representation and you receive payment in the amount you deserve.
