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How do insurance carriers determine if a vehicle is totaled?

After a crash, the insurance company will evaluate the damage and value. While the owner may think the vehicle is not in bad shape and repairs could bring it back to usable condition, the insurer may feel differently.

If the insurer believes the cost of repairs exceeds or is too close to the vehicle’s value, it will declare it a total loss.

The equation for totaled vehicles

To determine if there is a total loss, the insurer will consider the state of your vehicle before and after the accident along with the current market for the vehicle. The insurer will typically consider the cost of repairs and compare it to the value of your vehicle in its current state after the accident. If the cost of repairs is 75% or more of the cash value, which is how much your car was worth before the accident, it will be a total loss.

Owing money after a vehicle is totaled

After the insurer totals the vehicle, the owner may receive a payment for the actual cash value before the collision. Many owners have loans on their vehicles, and the insurer may pay this directly to the lienholder.

If the owner owes more than the vehicle is worth, it may mean there is no money remaining to put a new down payment on a new vehicle. Moreover, the owner may still need to repay the loan balance. The lender could make the payment due immediately because the car is no longer operating. The lender also might roll the amount into a loan on a new vehicle.

Legal action might be the best option

A personal injury lawsuit might be the best option for accident victims. An attorney also can represent the vehicle owner if there is a dispute with the insurance company or to recover damages from the negligent driver.