My Car Is A Total Loss - Now What? Part I

Disclaimer - Important! Don't Skip!

I'm an auto damage adjuster for a large insurance company here in Alaska. The information here is certainly applicable to Alaska but don't go all Milly-Vanilly on some poor adjuster in another part of the country because "George said..." Also, even if you are in Alaska, check with your insurance company - always - before proceeding. Every total loss claim is different so it's possible that the information here may not apply to your 1969 Ford LTD claim. Take this as it's meant: Generally Speaking.

My Purpose Here

So, you are having an exceptionally bad day. Your ride is broken - your fault or not - and insurance is telling you that it is a total loss. For most folks this is a first-time scenario and the road ahead looks scary and fraught with danger. My purpose here is to help folks to understand the process, take away some of the fear and provide enough information to help make it through the maze.

What IS A Total Loss?

Strictly speaking, a total loss is a financial consideration and nothing more. A car is "totaled" when it would cost more to repair it than what it is worth. The most important thing is to know that nothing else is taken into consideration. It doesn't matter if your dad gave you the car and it has tremendous sentimental value, it doesn't matter if you've had it since you were a teenager and you were going to pass it on to yours, and it doesn't matter if you really really really do not want it totaled. It is strictly a numbers game. Harsh, I know, but reality nonetheless.

How Does The Process Work?

It goes something like this: The adjuster (or sometimes a body shop) will be assigned to write an estimate. That's always the starting point. Every vehicle has a 17 digit identification number (VIN) that is unique to that vehicle and the adjuster enters that into the estimating software. The parts database is then loaded into that particular file.

The adjuster figures out which pieces of the vehicle are broken and selects them from the parts database to be placed on the estimate. The software is pretty sophisticated and will have the part price as well as labor and paint times. Years ago this was all hand-written using books. Oy.

As items are added to the estimate, the software keeps track of the dollar amount. The program has a very rough number in its head that it thinks this particular year, make and model is worth and when the estimate dollar amount reaches 80% of that number then the total loss threshold is "popped." At that point the vehicle is a total loss.

Okay, Now What?

Since it is now totaled and not going to be repaired, the adjuster needs to risk life and limb crawling around broken glass and McDonalds wrappers and airbags to figure out all of the options on the vehicle as well as the condition of interior items like the seats and such. The adjuster does that because all of that information needs to go to the service that will provide a vehicle valuation, determining the Actual Cash Value (ACV).  Here in Alaska, if the car is not going to be repaired, the insurance company owes for the ACV.

The valuation services determines the ACV through selecting comparable vehicles. In other words, they have a YUGE database of Alaska vehicles that are either for sale or have sold recently. They find similar ones to yours and make adjustments to a base value using say, options yours had and the comparable vehicles don't. This gives a fairly accurate representation for what your car is worth in Alaska.

Please note:

• The valuation service does NOT use book values such as Kelly Blue Book or NADA.
• Unless you specifically have a "New Car Replacement" option on your policy, the insurance company is not paying to replace your car. They are paying the value of the car. Yeah, those commercials from that one insurance company? Most of us in the industry hate that gal and her boyfriend "Brad" too. "New Car Replacement" is a premium option with lots of restrictions so if you have that, be sure and read the fine print.
• If the service does not have comparables for your specific car, then they will use dealer quotes. This means they will call local dealers and essentially say, "If you had this year, make and model of car, with this many miles, equipped this way and in this condition, what would you be selling it for?"

Value Considerations

• Your car is clean, but they are rarely "pristine." Most fall into the default category where no additional value is added, but nothing is subtracted either.
• Unrelated damage. If you have a big ol dent that never got fixed then there will be a subtraction for prior damage. How much? It depends on the damage. We tend to go light in this area and for example use the dollar amount from a used part but not add any labor or paint to the amount
• Tires. Ugh. Tread depth is measured and compared to new to determine the percentage of tread remaining. The problem is that if you spend $800 on a new set of winter tires, they do not add $800 to the value of the car. Plan on them adding more like a hundred. Sorry, but true.
• Customizations
  
  
  Generally no good news here in terms of value. Say you spent two grand on lifting your truck and you spent another three on multi-colored flames down the side. The truck is worth $5000 more now, right? Um, no. Sorry. Those kinds of customizations are considered "personal preference." YOU may pay an additional $5000 to have a truck like that but there are an equal number of folks who won't have a thing to do with it so it's a wash.

In Part II I'll go over what happens once the value comes back and address things like owner retained total losses, lien holders, and a few tips.

Thanks for coming by and if you have anything specific you would like to see in Part II then leave a comment.