Accidents happen, it’s just the way things happen some times. Car accidents can be extremely stressful situations. Not only are you concerned about everyone’s safety, but you may also be worried and stressed out about how your insurance will help you and handle the damage to your car.
If you find yourself to be in a situation where the damage to your car is extensive and possibly rendering it not operational, you may be questioning if your car will be totaled.
A car being classified as “totaled” means that it is a total loss and that the cost of repairing the vehicle outweighs the Actual Cash Value (ACV) of the vehicle. This is determined by the insurance company along with whomever they have asses the damage and estimate repair costs.
However, each state sets it’s own regulations on when to actually deem a car a total loss. In 21 states the Total Loss Formula (TLF) is used to determine if a car is a total loss. The insurance company calculates the TLF by adding up the cost of repairs with the scrap value of the vehicle. If this is equal or exceeds the ACV of the car, they will consider it a total loss. If the TLF comes in lower than the ACV of the car, it will be repaired and returned to you. There are no general rules for how insurance companies conclude the ACV of a car, so there is no easy way to predict how your car will be valued. The insurance company will always choose the cheaper option for them in then end.
The states that use the TLF: Alaska, Arizona, California, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Maine, Massachusetts, Montana, New Jersey, New Mexico, Ohio, Pennsylvania, Rhode Island, South Dakota, Utah, Vermont and Washington.
States that do not utilize the TLF method use a percentage based system where the repair cost cannot exceed a certain percentage of the ACV of the vehicle. The remaining states and their thresholds are: 100% threshold: Colorado and Texas.
80% threshold: Florida, Missouri and Oregon.
75% threshold: Alabama, Kansas, Kentucky, Louisiana, Maryland, Michigan, Nebraska, New Hampshire, New York, North Carolina, North Dakota, South Carolina, Tennessee, Virginia, West Virginia and Wyoming.
70% threshold: Arkansas, Indiana, Minnesota, Mississippi and Wisconsin.
65% threshold: Nevada.
50% threshold: Iowa.
If your car is considered totaled, depending on your insurance policy, your insurer will reimburse you or purchase you a vehicle equal to the ACV. For individuals who have financed their cars there may be a concern about the ACV of their car not matching what they still owe on the auto loan.
This is where insurance gap protection can come in handy. This is something purchased through your insurance company that pairs with your regular auto insurance policy generally; it can also be purchased separately offered by the dealership. This essentially kicks in if the insurance settlement for the totaling of the car does not pay off the amount that is still owed on the loan; the gap protection would pay off the remaining balance on the loan.