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When Is a Vehicle Considered Totaled?


Totaled Car Formular in California

Determining whether a vehicle is “totaled” after an accident can be an issue of confusion and anxiety for consumers. Even insurance professionals have a hard time parsing out the countless rules and regulations regarding the act of “totaling” a vehicle under a policy. But it doesn’t have to be so difficult. This article will hopefully help illuminate the factors that are taken into consideration when “totaling” a vehicle.

Usually, an automobile is considered to be “totaled” when the cost of repairs exceeds its actual cash value (ACV). For all intents and purposes, though, it is not always wise to repair a vehicle, even if the costs of repair is less than its ACV. A vehicle worth $5,000 requiring $4,000 in repairs may be viewed as “totaled” by an insurer despite the fact that the cost of repair is lower than its value before the crash. Vehicles like these are usually treated as total losses by insurance companies.

While the procedure differs somewhat from state to state, the insurance company will normally take ownership of the totaled vehicle (known as “salvage”) and may acquire a “salvage title” for it. After insuring the pre-loss ACV of the vehicle and forwarding the certificate of ownership, the license plates, and a fee to the Department of Motor Vehicles (DMV), the insurance company may decide to get the vehicle repaired, re-registered, and classified as a “salvaged” vehicle; or keep the “totaled” vehicle and have the value of the salvage deducted from the claim payment.

In figuring out whether a vehicle is totaled, insurance companies will evaluate the total loss ratio (repair expenses/ACV), also sometimes referred to simply as the damage ratio, and then compare this ratio to either internal company limits and/or those established and enforced by state law. Unlike many other states that impose a limit which must be exceeded in order for an automobile to be considered totaled, known as the Total Loss Threshold (TLT), the state of California uses a rule known as the Total Loss Formula (TLF) which goes like this:

Cost of Repair + Salvage Value > Actual Cash Value

In the event that the total of the first two quantities exceeds the ACV, the vehicle can be deemed a total loss. As an illustration, consider a damaged vehicle that has an ACV of approximately $2,500. The estimate for total repair expenses stands at $2,000, for a damage ratio of 80 percent. In California, the TLF would come into play and, if the salvage were valued at $600, the car would be totaled ($2,000 + $600 > $2,500).

For answers to all of your questions about auto accidents, insurance procedures, and coverage, contact the experienced personal injury attorneys at Wilshire Law Firm. As vehicle crash case specialists, we can provide you with a comprehensive understanding of your specific accident case and your legal options. After talking with us, you will know where you stand. So call us today at (800) 522-7274 to receive a FREE consultation.

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