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My car was recently involved in an accident (read above if you want to know the details) and I have a question on totaling a car.
From what I understand, when a car gets damaged, and the insurance company estimates that the cost to fix exceeds a certain percentage (something like 70%?) of the car's value, then they decide to "total" the car, which means you get paid the market value of the car before it was damaged.
So using some numbers as an example, say my car was worth $10K before the accident. Insurance people gets an estimate from their authorized shop that it will cost $7K or more to fix. Rather than fixing the car, they just pay me $10K.
Am I correct on this understanding?
Here is what I don't understand. Why would the insurance company pay me $10K when it would cost $7K to fix? Or is this some kind of an insurance law that forces them to do this?
If it matters, the car is registered in NY, the accident happened in CT and my dealership crashed the car. There is a police report pending, but according to my dealership, it was the other party's fault.
they could probably make up some of the difference by selling what's left of the car. plus time/cost of dealing with repairing the car is something to consider-easier for them to just cut you a check and get rid of the car.
i believe the details of the laws in a scenario like yours varies state-to-state.
to answer your question, though, i would assume the main reason they opt for this is because the initial estimate is just that, an estimate. with that much damage, the body shop could easily get into the repairs and realize the costs will be MUCH more.
as a side story, i had a buddy who wrecked his Acura Vigor when we were in college. the estimate to repair was almost what the car was worth, so his insurance wanted to just cut him a check. the car had a lot of sentimental value for him, though, so he appealed to hsi insurance agent and the decided to fix the car instead.
Lightning ... your understanding re values/totalling is correct.
There's no law that forces the insurance company to do this, it's just been a "rule of thumb" as to the best use of funds at that point. As a general condition, a car that needs that much restoration work to put it back on the road will likely have other issues remaining which may affect it's safety or proper running after the accident repair.
With rare exceptions, you are better off with the car being totalled than trying to keep it on the road.
If you feel that the insurance settlement is not adequate for your loss, than you can seek additional compensation from the car dealership. Perhaps they'll be able to replace your car for a very low price.
Those of us who drive older cars with low FMV's are the ones who take the biggest loss in these situations because it doesn't take much repair cost to justify totalling a vehicle.
If it was the other pasrties fault then you would best sue them for any difference you can prove which may be hard. Sometimes the car is more valuable to you but the courts won't recongnise that in most proabilties.
I just went though this with my 19 yr old car & it stinks.You could take the dealership to court but the judges generally rule in the other partys favor unless you can prove the car was worth more.That will cost you money & time.Its best just to take the property settlement & get another car.Maybe the dealership will give you a good deal.They should seeing they are 100% at fault.Good-luck & keep us posted on what you decide to do.
I just went though this with my 19 yr old car & it stinks.You could take the dealership to court but the judges generally rule in the other partys favor unless you can prove the car was worth more.That will cost you money & time.Its best just to take the property settlement & get another car.Maybe the dealership will give you a good deal.They should seeing they are 100% at fault.Good-luck & keep us posted on what you decide to do.
We havent decided on a settlement yet. And I want to understand this totaling business clearly because I may want to ask the dealership to propose this its insurance company.
So, just to understand the concept of totaling a car... I still don't understand why an insurance company would opt to do that. I could undertand them totaling if the cost to fix is equal to or greater than the value, but why would they offer to total when the cost to fix is a certain percentage (or fraction) of the value?
If they offer to total and pay you $10K when it could've been fixed for $7K, aren't they paying $3K more than what was required of them?
If your car's market value is $10k and they total your car and pay you $10k minus the deductible I'd say you have a decent insurance company. I've seen a few cases when they try to hose you by trying to make you settle for way less than it was worth....then you have to call them and threaten to sue...yeah it's no fun.
Your insurance company will sell your car at auction out of an insurance salvage pool. Depending on the car and how much damage there is they could potentially make up the difference between the $7k and $10k.
And like someone else said, the body shop only provided an estimate. It could very well be more than the estimate. Sometimes it's just easier to cut a check and get it over with.
If your car was worth $10K before the accident even if repaired after the accident it is no longer worth that much. I believe they refer to it as diminished value. It is now a car that has been repaired.
My car was recently involved in an accident (read above if you want to know the details) and I have a question on totaling a car.
From what I understand, when a car gets damaged, and the insurance company estimates that the cost to fix exceeds a certain percentage (something like 70%?) of the car's value, then they decide to "total" the car, which means you get paid the market value of the car before it was damaged.
So using some numbers as an example, say my car was worth $10K before the accident. Insurance people gets an estimate from their authorized shop that it will cost $7K or more to fix. Rather than fixing the car, they just pay me $10K.
Am I correct on this understanding?
Here is what I don't understand. Why would the insurance company pay me $10K when it would cost $7K to fix? Or is this some kind of an insurance law that forces them to do this?
If it matters, the car is registered in NY, the accident happened in CT and my dealership crashed the car. There is a police report pending, but according to my dealership, it was the other party's fault.
The main reason is that most estimates are just that- estimates. On average, the supplement costs are about 10-15%. Add to that car rentals and the loss of salvage (if I total a car at $10,000, depending on the impact area, I can expect about 12% salvage value) and 70% is about right these days.
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