clock May 18, 2017 comments No Comments flowchart Automobile InsuranceOur Blog tag Liability


If you’re involved in an unfortunate accident you’ll file an insurance claim and the insurance company will request an inspection. However, the insurance company may not repair your vehicle under certain circumstances.

Generally, insurance companies consider a car a total loss when it costs more to repair than it is worth. In this case, the insurance company pays you a settlement and declares the car a “total loss.”

How Does An Insurer Decide?

Your insurance company compares the value of your car to estimated repair costs. They often use data from the National Automobile Dealer Association, valuation publications, and other factors such as the year, model, make, mileage, and condition of your car to determine what the depreciated value of your car is worth, also known as the actual cash value (ACV). If you’ve made improvements to your car, tell your insurance company as they may impact the value.

If ACV is less than the repair estimate or a percentage of the estimate, they may write off the vehicle as a loss instead of repairing it, regardless of vehicle age.

Sometimes repairs will not make it safe enough to meet safety standards or the cost could be too high. If either applies, the insurer may choose not to repair it.

Each state also has specific criteria for them to consider a car road worthy. If repairs cannot restore the vehicle to an acceptable condition, state law may deem the vehicle a total loss.

It’s A Total Loss

Your insurance company called and told you your car is a total loss. Next, the claims adjuster will analyze the damage to the vehicles, police reports/evidence, driver and eyewitness statements, and Rhode Island road laws to determine which driver was at fault for the accident. Here is what you need to know about your totaled vehicle based on whether or not you are found at fault for the accident.

I Am NOT At Fault For The Accident

If you are found not at fault for the accident, you have three possible ways to get reimbursed for the damage to your totaled vehicle. The first way is by collecting under the at fault party’s liability insurance. Liability coverage in Rhode Island is mandatory for all registered vehicles. The liability insurance on the at fault vehicle is responsible for reimbursing you the damage their vehicle caused to your totaled vehicle. In this case, their insurance carrier should handle your loss and you should not pay a deductible for your damages.

The second way to get reimbursed for your totaled vehicle if you are not at fault is by collecting under your own vehicle’s collision coverage. If you have the optional collision coverage on your vehicle, you can claim the damage under your own policy, minus your deductible. In this option, your insurance company will try to go after the responsible party. If your company is successful in recouping their loss from the at fault party’s insurance carrier, your deductible will be reimbursed to you. This option is sometimes quicker and less hassle especially if it may be difficult upfront to determine who is at fault or if it’s questionable whether the at fault party had valid insurance at the time of the accident.

The third and final way to get paid for your totaled vehicle is to collect under your own vehicle’s uninsured motorist property damage coverage. If you have the optional uninsured motorist property damage coverage on your vehicle and you were hit by an identified driver that is proven to be uninsured at the time of the accident, you may collect from your own insurance company under the uninsured motorist property damage coverage. Rhode Island law states that this coverage is always subject to a $200 deductible which would be deducted from your total loss payment.

I AM At Fault For The Accident

If you are found responsible for the accident, your insurance policy will provide coverage for the other person’s damages under your mandatory Rhode Island liability insurance. The only time you can collect under your own insurance for your damaged or totaled vehicle as a result of an at fault accident is if you have the optional collision coverage on your vehicle. With collision coverage, your insurance carrier will pay you the value of your totaled vehicle, minus your deductible regardless if you were at fault or not.

You’ll Transfer Ownership to the Insurer

As part of receiving a settlement payment for a totaled vehicle, the insurance company takes ownership of your vehicle. In some cases, people ask if they can keep their car and the settlement payment in hopes that they can fix the car and get it on the road again. Many states do not allow this due to safety concerns and even where it is allowed, it may be almost impossible to insure the vehicle again making it worthless to keep and almost impossible to sell. Also, if you choose to keep your totaled vehicle rather than transfer ownership to the insurance company as part of the settlement, the insurer will actually deduct the salvage value of the vehicle from the settlement payment made to you. Thus you are usually left with far less money than the cost to make the necessary repairs to make the vehicle road safe again and able to pass a Rhode Island vehicle inspection.

Actual Cash Value Versus Vehicle Replacement Coverage

If your car is totaled, the insurance company will pay the depreciated value, also known as actual cash value, of the vehicle. As discussed already, they may subtract your deductible from the settlement payment depending on who was at fault and which type of coverage is being used to cover the loss. If you own your vehicle outright, the settlement will be paid to you directly. If you have an outstanding loan or lease on the vehicle, the payment is made to you and the lienholder of the vehicle. The lienholder will keep the outstanding loan amount before releasing the title and you would receive any amount left over after the loan amount is satisfied. Actual cash value is usually less than the cost of purchasing a brand new vehicle since a car depreciates immediately after driving it off the lot. If you own a newer vehicle with an outstanding loan, you may have a gap in coverage between what the total loss settlement and the outstanding amount of your auto loan. In this case, it is helpful to have Loan/Lease GAP Insurance which would kick in the difference to pay off the loan.

Rental Car Coverage

If you have rental car coverage, you’ll have a vehicle to drive. Your policy helps you with the cost of a rental vehicle until you can find another car, but check coverage length as you’re responsible for fees beyond policy limits.

Totalling a car doesn’t always involve a major accident, so it’s very important to guard against a total loss. Liability coverage alone does not protect you, but uninsured motorist property damage, collision coverage, GAP insurance, and rental car coverage can help you get back into a vehicle quickly and with fewer headaches.

We’d be happy to review your auto insurance policy with you to make sure that you don’t have any gaps in coverage. Give us a call, today.

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