One of the most common questions after an accident is “what is going to happen to my vehicle?” There are a few things to know about how insurance companies evaluate whether a vehicle that has been involved in an accident is a total loss or is worth repairing. Below is an overview of the process.
Why You Need Gap Insurance
The insurance company will only pay what the value of your car is right before the accident. They will not pay what you owe on the car. For example, if you owe $25,000 on your car loan but your car is only worth $20,000, then the insurance company will only pay you $20,000 if your car is totaled in an accident.
Therefore, it is imperative you purchase GAP insurance on your vehicle. GAP insurance should cover the difference between what your car is worth and what you owe on your car.
1. Liability Determination
If you were responsible for the accident, or you are using your own auto insurance to repair your car after an accident, you can skip this section. However, if you are expecting the other driver’s insurance to pay for the repairs to your vehicle, you first will need to convince them to accept fault for the accident.
2. Vehicle Inspection and Repair Estimate
The next step is for the insurance company to send a representative out to your car’s location to inspect it and write a repairs estimate. If they are unable to complete the inspection where the car is currently located, they may need to tow it to their local repair yard to inspect it there — at no cost to you.
3. Fair Market Value Comparison
Once the repairs estimate is complete, the insurance company will then look at all recent car sales in the area of cars with the same year, make, and model as your vehicle and roughly the same mileage. They will then average these prices together to create a fair market value estimate for your vehicle.
4. Total Loss Determination
The insurance company then compares the repairs estimate with the fair market value of the vehicle. If the repairs estimate exceeds the fair market value, the car is determined to be total loss and the insurance company will take the vehicle as salvage and pay you the fair market value (the total loss payment). If, however, the cost to repair the car is cheaper than the fair market value, the insurance company is required to repair your vehicle at no cost to you (other than your deductible if you are using your own insurance).