Car Totaled? Here’s How Auto Insurance Calculates the Value

If your vehicle has been declared a total loss after an accident, you may wonder how the value is determined.

What Does “Totaled” Mean?

A car is considered “totaled” when the cost to repair it exceeds a certain percentage of its actual cash value, or ACV. This threshold varies by state and insurer, but it often falls between 60% and 80%. For example, if your car is worth $10,000 and the repair estimate is $7,000, it may be declared a total loss.

How Is the Value Calculated?

The value of a totaled car is typically based on its actual cash value at the time of the loss. This is not the same as the price you paid for the vehicle or the amount you still owe on a loan. It is the market value of the vehicle just before the accident, considering several factors:

• Make, model and year: Some vehicles hold their value better than others. Popular models with high resale demand may be valued higher.

• Mileage: Lower mileage often increases a car’s value, while higher mileage may reduce it.

• Condition: The pre-accident condition of the vehicle matters. This includes the interior, exterior, mechanical systems and any prior damage.

• Optional features: Add-ons like leather seats, sunroofs or upgraded audio systems can influence the value.

• Local market trends: The value also reflects what similar vehicles are selling for in your area.

Insurance companies often gather this information using third-party valuation tools or databases. Sometimes, they may also consult local dealerships or recent sales data.

Can You Dispute the Valuation?

If you believe the valuation is too low, you can typically provide documentation to support a higher value. This might include recent maintenance records, receipts for upgrades or quotes from local dealerships. The insurer may review this information and reassess the offer.

What Happens Next?

Once the value is finalized, the insurance company will issue a payment, minus any deductible and applicable adjustments. The payment may go directly to the lender if you have a loan or lease. If the payout exceeds the loan balance, you may receive the difference. If it falls short, you may still owe the remaining balance unless you have gap insurance.

Contact Us

If you have questions about determining your vehicle’s value or want to review your current auto policy, contact your agent at Express Auto Agency today.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.