What happens when your vehicle is a “total loss”

Perhaps you’ve ran into this before. You’re in a car accident and your vehicle is declared a “total loss.” What does that mean? What happens next?

Assuming there’s been an accident, a total loss refers to the cost of repairs outweighing the cash value of your unwreckedvehicle. Now, there are nuances to this. Not every state defines a total loss the same way. Some states use what’s called a “total loss formula.” According to Jackson White, attorneys at law, the formula is:

Cost of Repair + Salvage Value > Actual Cash Value

There is also what’s called a “total value threshold.” This means if the cost of repairs goes over a certain percentage of value, then it would be considered a total loss. For example, if New York has a 75% threshold, that means thatif repairs for a damaged vehicle cost more than 75% of the car’s cash value, it would be considered a total loss.

Once your vehicle is declared totaled, they are claimed by your insurance company and sold to salvagers.

As always, it is best practice to have car insurance. Property damage liability (PD) is a big deal here. It covers damage created by you against another person’s vehicle. So, assuming you’re at fault for the collision, the insurance will take care of it. Likewise, if you’re the one who was hit, in order to get a payout, you’ll need to file a claim against the opposing driver’s PD. There’s also collision insurance. The beauty about this is you’re covered even if you’re at fault.

In short, total losses are never fun. Should this unfortunate event happen to you, please review how your state assesses total losses. Should another be at fault for the incident, make sure to file a claim. And please, make sure you have the proper insurance. You don’t want to find yourself in a situation where you need it and don’t have it.