A “totaled” car is a term insurance agencies and owners use to describe a vehicle with so much damage — in an accident, accidentally or otherwise— that it is a total loss.

According to David Antocci, Vice President of Claims for MAPFRE Insurance, a total-loss designation — as well as establishing a value — can depend on state-specific regulations and statutes or an individual company’s policy language.

“One thing everyone should understand when they purchase auto insurance is the type of coverage they’re getting,” Antocci said.

He added that many companies offer ‘stated amount’ coverage, which can apply to older yet valuable vehicles, like classic cars. Companies also have coverage offerings such as ‘new replacement cost’ coverage for vehicles of a certain age, usually under two years. In other words, it’s always a good idea to shop for your best option for coverages, which should make the total loss settlement process much more straightforward at the time of an accident.

DAMAGE ASSESSMENT
In general, a vehicle is a total loss when the damage to the vehicle, as a result of the covered loss, plus the salvage value, equals the vehicle’s value before the accident.

“As a rule of thumb, a totaled vehicle’s damages equal roughly 75 percent of its actual cash value,” he said. However, the valuation of a totaled vehicle is usually determined by a combination of the following factors. They are not necessarily equally weighted, but they all have a role in the final analysis:

• Purchase price, plus improvements, less any old or unrelated damage present prior to the accident.
• “Book” value, such as those offered in Kelley Blue Book, N.A.D.A, etc.
• Similar vehicles currently for sale or recently sold.

VEHICLE APPRAISALS 
The insurance appraiser assigned to inspect the vehicle is usually the same individual who establishes the value, Antocci said. Some claim departments utilize additional adjusting staff to help reach the final determination; however, they rely heavily on the appraiser’s expertise. The appraiser is usually someone who has extensive training and knowledge in vehicle repairs; some states require licensing to perform in that capacity. These individuals can be company staff appraisers, or they may work for independent adjustment firms that represent multiple carriers.

Antocci said the newer and more valuable a vehicle, the more “unknown/unseen” damages to electronic and sophisticated computer modules can become a factor. There are also situations, such as localized flooding or more broad catastrophic situations, that cause substantial water intrusion to the interior of vehicles as well as possibly affecting the engine, transmission and other drivetrain components.

In such cases, he said, it’s best to call the vehicle totaled. Sometimes, as with natural disasters like hurricanes, the federal government steps in to prevent damaged cars from entering the market.

Notwithstanding the expertise of the appraiser, the owner is most familiar with their vehicle, its maintenance history, true mileage, and upgrades that the appraiser would be unaware of and which can have an impact on the value.

“The owner has access to much of the same information the appraiser utilizes in determining a total-loss value,” he said. “They should do their homework so they can be comfortable having an informed discussion with the company representative and that they are receiving a fair and equitable settlement.”

OPTIONS AVAILABLE
There are several options at the insured’s disposal when the insurance company determines that a car is a total loss.

“The most convenient option is the company picking up the vehicle and disposing of the salvage,” said Antocci. “This allows for a full-dollar value settlement to the customer, and they can use the funds for a replacement vehicle.”

In some cases, usually with older, less-valuable vehicles, the customer can opt to retain and repair the vehicle. The company would simply deduct the salvage value from the settlement. In many cases, insurance companies consider an older vehicle a ‘total’ due to the high cost of parts. However, a qualified repair shop may be able to find used parts to get a vehicle back to safe condition.