The short answer is that a car is considered a total loss when the cost to repair the vehicle is more than the vehicle is worth. The exact requirements for totaling a car can vary in each state, but the general guidelines are consistent.
Let’s explore how/when a car is considered totaled and what that means for the car and insurance.
Salvage Vehicles in Colorado:
According to the Colorado DMV, a car is considered a total loss when “the cost of repairing the vehicle to a roadworthy condition and for legal operation on the highways exceeds the vehicle’s retail fair market value immediately prior to such damage.”
To be considered a salvage vehicle, it must be damaged by collision, fire, flood, accident, trespass, or other occurrence, excluding hail damage. Hail damage alone doesn’t result in a salvage title in Colorado since the car is still considered roadworthy.
Once a car qualifies as a salvage vehicle, the owner must surrender the title to the DMV to get a salvage title. On the salvage title application, the owner must disclose the type of damage that resulted in the salvage vehicle.
What factors do insurance companies consider when determining if a car is a total loss?
Insurance companies look at a combination of the following factors:
- The damage to the vehicle
- The current value of the vehicle (immediately prior to the loss)
- The vehicle’s salvage value
- State rules and regulations
- Availability and accessibility of replacement parts
- The ability of the damage to be repaired to roadworthy condition
- The length of time it’ll take for repairs
- The potential for hidden damage
If you’re in an accident and the other driver was at-fault, their liability insurance will pay to repair your vehicle. In a case where the cost to repair your car is more than the car is worth, the insurance company can declare your car a total loss and pay out the actual cash value of your car.
In an accident where you were at-fault and have collision coverage on the vehicle, then your insurance policy will cover the damage to you car. And if it’s something other than an accident that causes damage, like hail, vandalism, or flooding, you’d need to have comprehensive coverage on the car for your policy to pay for the repairs. When it’s your collision or comprehensive coverage paying out, the settlement will be the actual cash value, less your chosen deductible.
Actual Cash Value: The market value of the car, or what someone else in your area would reasonably pay for the same car. It’s essentially the replacement cost minus depreciation for age and wear and tear.
What happens if a car is declared a total loss?
You can release the car to the insurance company and accept the actual cash value, or keep the car and take a lesser payment. If you choose to keep the vehicle, the insurance company will subtract the salvage value from the settlement offer and you’ll be given the difference. Essentially you buy back the salvage title.
If the insurance company was providing you with a rental car, there is generally a limit of time they will continue to provide the rental after informing you that your car is a total loss. Many companies will pay for the rental car for another 2-5 days, after that you would have to return the rental car or pay out of pocket.
What if I have a loan on my car that is totaled?
Unless you have purchased additional coverage, the presence of a loan or lease on your car doesn’t impact the claim payout offered. If you owe more than what the car is worth, you could end up paying the difference out-of-pocket.
If you have Gap coverage on your policy, your insurance company will pay the difference between the car’s value and what you owe on your loan or lease. I highly recommend Gap coverage for any car that has a loan or a lease.
How is the value of my car determined?
Any or all of the following details can determine the actual cash value of a vehicle:
- Local Market
Can I insure a salvage title vehicle?
Yes, there are options available for insuring a vehicle that has been deemed a total loss. Each insurance carrier has their own guidelines when it comes to insuring salvage vehicles, and some won’t insure them at all. But there are carriers that will offer coverage, though it might be limited, for a totaled vehicle.
Some insurance companies will allow you to keep comprehensive and collision coverage on a previously totaled vehicle, but the payout for any claim would take into account the damage to the car. Other companies will only allow you to carry liability coverage on a salvage title car.
In Colorado, hail damage alone doesn’t require a salvage title, but insurance companies can still limit the coverage they provide based on the previous damage. Since hail damage is generally cosmetic and doesn’t often impact the safety of the vehicle, it’s easier to find coverage for a car that was totaled from hail damage as opposed to an accident.
The best way to get the coverage you want on a vehicle that has been totaled is to work with an insurance broker, like Integrity First. We work with many different insurance companies, so we can find a fit for the coverage you need. Give us a call today if you have questions about a salvage vehicle or want to get a quote.
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