What to Do When Your Car Is Totaled in an Accident

If you’ve been in an accident where your car has been totaled, the first thing you might want to do is feel grateful that only the car was lost. After all, cars can be replaced, though the process might be more frustrating than you’d like.

It’s also helpful to understand what the insurance industry means by “totaled.” It doesn’t mean that the car can’t be repaired or is literally a total loss. In fact, your insurance company will take your car and sell it for parts at the nearest salvage yard — and may recoup a substantial portion of the amount they pay out to you. However, the car is a total loss to you if your insurer decides that repairing the vehicle would be economically wasteful.

Insurance companies in New Jersey use what is called the Total Loss Formula to decide whether to declare a car a total loss:

Cost of repair + salvage value > actual cash value

So, if repairs to your car would cost $5,000 and the insurer could get $3,000 for parts, but the actual cash value is only $7,000, TLF determines the car is totaled. Then, no matter how emotionally attached you might be to the vehicle, you’ll be getting a check for its cash value, minus your deductible, plus certain replacement costs, such as estimated sales tax, vehicle registration and title. Although the term “total loss” sounds drastic, insurance companies use the term in about 14 percent of accidents.

To make sure you are getting a fair settlement, you should research different sources, such as the Kelley Blue Book, that can give a fair market value for a car of your make, model, year and mileage.

There are other questions you’ll need to have answered:

• Does my insurance cover a rental car? Until you get a reliable replacement vehicle, you’ll need a rental to get around. If your insurance does not cover a rental car, this could be a significant expense.
• Do I have “gap insurance”? The “gap” is the difference between the current appraised value of your car and what you still owe on your car loan. Your insurer will only pay the car’s fair market value, so if what you owe on the car plus your deductible is more than the car is worth, you have a gap. Without gap insurance, this is a loss that comes out of your pocket. (A gap is very likely if you’ve been paying off the loan for less than a couple of years.)

If you’re unsure about your insurance coverage, it’s best to have a talk with your agent and make appropriate adjustments before there’s an accident. After the fact, you’re stuck with the coverage you have.

Insurance companies are generally reasonable about property settlements, since purely economic losses are relatively easy to quantify. However, when a claim also involves personal injuries, it’s best to consult an experienced and knowledgeable accident attorney.

If you need legal representation for your vehicle accident, call Seigel Law at 201-444-4000 or contact us online. We offer free consultations for injured clients in Bergen County and throughout New Jersey.