Missourians are quick to assume that the severity of a car crash determines whether or not a car is totaled. To many, a totaled car means one that is crunched beyond recognition.
While it is true that those unrecognizable cars are likely to be totaled, the actual definition of a totaled car is slightly different. This legal definition could make for frustrating property damage claims: for a car to be deemed a total loss, the cost to fix the damages must exceed the value of the car itself.
How The Adjuster Determines A Total Loss
If you know your car’s value, it may be easy to predict whether or not your car accident resulted in a total loss, but you won’t officially know the insurance company’s determination until an adjuster has inspected the vehicle.
While the procedure varies from state to state, the process is very similar. After a substantial accident, you’ll bring your vehicle to a car lot, or maybe have it towed to your house. The adjuster will inspect the damage. Specifically, they’ll see what damage is from the accident, and what might have been a dent from a prior crash.
To determine whether the vehicle is totaled, the insurance company will calculate the total loss ratio. This is the cost that it would take to repair the vehicle at an auto shop divided by the cash value of the car. Most insurance companies will use a car value database like Auto Trader or Kelley Blue Book as a guideline to determine the cash value of the car based on the model, year, and mileage.
Definition Of A Total Loss By State
Some states dictate how high the total loss ratio has to be in order to be able to declare a vehicle a “total loss.” For example, if the cost of repairs are 90% of the value of the car, some states may call that totaled. In other states, the definition of a total loss is set at exactly 100%.
Most states’ total loss ratios fall between 70 and 85 percent. However, several states use a “Total Loss Formula” to rely on, which is:
Cost of Repair + Salvage Value > Actual Cash Value
If the sum of the first two quantities is greater than the actual cash value of the vehicle (ACV), then the car can be declared a total loss. To declare a total loss, the loss ratio must exceed the established state percentage.
Below are the requirements for a declaration of total loss by state according to Claims Journal:
Example of Missouri, Illinois, & Arkansas TLT Ratios
For example, a 2001 Nissan Maxima with 185,000 miles has a value of about $2,100. After a crash, the total repair costs were estimated to be about $1500. The damage ratio is about 71%. In Arkansas, where the TLT is 70%, that would be considered a total loss, but not in Missouri. Missouri’s TLT is 80%.
If the accident occurred in Illinois, the TLF would be used. So, to keep math easy, let’s say the salvage value is $500. The car would not be totaled. ($1,500 + $500 < $2,100). Of course, with numbers this close, there may be some dispute.
What If The Totaled Car Isn’t Paid Off Yet?
The car’s value may not match up to the amount you owe on your loan. In fact, if it does, it is just by coincidence. Car loans can influence the stress of losing a vehicle to an accident.
The best case scenario is that the total loss check the insurance company writes ends up greater than the amount you still owe on your car loan. In that case, you pay off your loan, and get a few hundred dollars in your pocket. (Which will come in handy when you need to purchase a new car.)
Unfortunately, if the amount owed on your loan is larger than the insurance company’s check, you’ll still be looking at monthly loan payments. Again, you are legally obligated to make your monthly payments until the loan is paid off. The reason for this is because the bank or lender still has the right to repayment of the loan they gave you, whether or not you still have the car.
For this reason, many people have “gap” insurance. This type of coverage can be applied towards the “gap” or difference between the amount owed on your car, and the amount you receive from your total loss. You’ll need to speak with your own car insurance agent.
What To Do After You Total Your Car
The first priority immediately following a car accident is ALWAYS to check for injuries on yourself, your passengers, the other drivers, and their passengers. Regardless of who is at fault, anyone can be hurt, and may need help. If there are serious injuries, call emergency services right away.
Once it is determined that injuries aren’t present, or they’re minor, you can start thinking about the damages to your car. We recommend taking pictures of your own car and the other cars. Everyone carries a phone with a camera these days, so that part should be easy (unless the phone was damaged in the crash).
Call a car accident lawyer right away. Your insurance company may tell you to call them right away after a crash, and it’s true to do this quickly, but consultations for car accident law firms are free. A lawyer may be able to give you quick advice before you contact the insurance company.
If you find yourself in a crash, you’re always welcome to call Schultz & Myers Personal Injury Lawyers. Yes, we are a personal injury law firm, but we’re happy to answer some general questions for free, even if we don’t represent you. Remember the fours: 314.444.4444.