Several situations can cause insurance companies to consider a car a total loss. Should your car get stolen and never recovered, it is regarded a total loss and the insurance company, as per your policy, will replace it. Another situation is a car that has been damaged beyond repair. In this case, the car is considered a total loss. A salvage car, on the other hand, is a car that has been damaged but can be repaired. However, if the insurance finds that the costs of repairs outweigh the cost of replacing the car, they may opt to replace your car and selling the damaged car as a salvage. Total loss cars are sold as scrap. So what’s the difference between salvage and total loss- how are they decided?
How Insurance Companies Determine if a Car is a Total Loss
Before deciding if the car is a total loss, insurance companies find out how much it would cost to make the repairs. The usual threshold is 70-75%. If the cost gets to this percentage of the value of the car, insurance companies consider the car a total loss. Note that when the car is being repaired, based on the agreement between the client, the insurance company is responsible for the leased car the client is using until the car is repaired or replaced.
Factors That Influence the Value of a Totaled Car
Before taking insurance, it is important to understand what may influence the compensation you will receive from the insurance company should your car get totaled. Some of the things which will influence the value of your car include;
- The Type of Car. The depreciation of the car plays a critical role in the compensation you will receive from the insurance company. Luxury and classic cars receive different cover compared to average cars since their depreciation varies.
- The Age of the Vehicle. This is the easiest way for insurance companies to determine the value of the car after it has been totaled. There are several agencies you can approach to get an estimated value of your car should you suffer a total loss today.
- The Condition of the Car. This is why the maintenance of your car is critical. Insurance companies do not carry out a superficial analysis of your car. They also consider the condition of the car at the time of the accident. If the car is in poor condition, the value of the car will be much lower.
- The Cause of the Accident. If you were responsible, wholly or partially, for the accident, insurance companies will take this into consideration when calculating how much you will receive as compensation. This is one of the reasons why installing a 3600camera is crucial as it will be your ally when you seek compensation.
Reasons the Insurance Company May Choose to Consider Your Car a Total Loss
If you have a sentimental attachment to your car, it may be difficult to accept the decision to declare it totaled. However, several factors influence the conclusion of the insurance company.
- Your car may not be repaired to be safe enough to drive. This is a priority for the insurance company. Just because the car can be fixed does not mean it will be safe for the road. In this case, the insurance company may opt to consider the car a salvage vehicle.
- The value of your car is lower than the cost of repairs.
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Can You Retain a Totaled Car for Sentimental Reasons?
If you want to retain the car even if it’s not roadworthy, you can discuss this with the insurance company. However, this means you will get much less as compensation since the insurance company would have chosen to sell the car as salvage or scrap.
How Cars Become Salvage
It is critical for insurance companies to determine whether a vehicle is salvage or a total loss. Some of the factors in favor of recognizing a car as salvage include;
- The recovery of a stolen car whose compensation has already been paid out. Since the insurance company is not in the business of selling cars, it would consider this car a salvage vehicle.
- Classic cars that can be restored, particularly for sentimental reasons.
- Cars affected by natural disasters such as floods. The damage may not be as visible as in the case of an accident, but it is there all the same.
The Difference between a Salvage Title and Rebuilt Title
When a salvage car is put up for sale, a salvage title is issued. This shows that the car has been damaged and is not roadworthy. Once you have carried out repairs and had the vehicle inspected, you will be given a rebuilt title. This title means the car was once damaged but has been restored and is safe on the road.
Many insurance companies insure salvage cars. However, the cover is much lower than that of a new or used car. When buying a car, it is essential to verify the type of title. For a salvage car, it would be best to check the status of the title. If you want to buy a salvage car, you should find out about the possibility of getting insurance coverage. This way you can make an informed decision.
The challenge of buying a car with a rebuilt title is that you do not know how severe the damage was. Before purchasing a rebuilt car, have your mechanic inspect it to confirm the actual condition of the vehicle.
Knowing the difference between total loss and salvage cars will help you understand the payout you get.
You may even negotiate with the insurers if you feel the payout is lower than it should be. If you have a good eye, you might get a salvage car at a grand bargain.