How to Get a New Car After a Total Loss
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Getting a new car after a total loss may depend on how much you get from an insurance company after you file a claim. If you solely have liability insurance, know that it only covers the other driver's losses if you caused the accident. If the accident was not your fault, you'll receive the actual cash value (ACV) of that car from the other driver's insurance company. If you have collision coverage and you caused the accident, you'll also typically get the ACV of the car, but from your own insurance company along with a rate hike. Comprehensive insurance is the only coverage that pays claims if the vehicle was stolen and not recovered or destroyed due to a natural disaster.
Here's everything you need to know about buying a new car after a total loss, as well as some car insurance tips for getting a fair insurance claim payout.
What Is a Total Loss?
A total loss is an insurance term that describes a car so badly damaged in an accident that its repairs exceed its current value. Major insurance companies use a formula that adds up your vehicle repair costs plus its salvage value. If these two amounts total more than your car's actual cash value (ACV), your insurer may consider your vehicle a total loss.
An insurer may consider any vehicle, new or old, a total loss when the repair costs are too high. For example, an adjuster may consider a truck a total loss if its repair costs are $10,000, but it's only worth $4,000.
The insurer wouldn't pay to fix this vehicle; instead, they would write a settlement check for $4,000 based on the truck's current value.
How To Buy a New Car After a Total Loss
You may be able to lease or finance a new car with nothing down, but the best way to do it is to take the money from the insurance company for your total loss and apply it to the purchase of the new vehicle. Whether or not you get any money back depends on who was at fault in the accident (if there was an accident), if your car was recovered (if stolen or destroyed by an act of nature) or if you carry collision coverage (if you caused an accident).
The only situation in which you would not get any payout is if you caused an accident and do not carry collision coverage on your car insurance policy. Otherwise, you will receive the ACV of your car, or what's often called "the blue book value" of the car, unless your collision coverage has a replacement coverage clause, which may help you replace your car with a totally new vehicle without having to reach into your own pocket.
To get any money from car insurance to put towards an existing balance or a new car you must:
- File a claim by contacting your insurance agent right after the accident or after you realize your car has been stolen.
- Work with the insurance adjuster to determine the cost of repairs and the value of the car just prior to the loss.
- Send the vehicle's sales receipt, taxes and the title documents to the insurance adjuster.
- Research your car's value to see if the insurance company's offer for a payout is fair.
- Wait 45 days after all paperwork is done to receive the payout, which may also be paid to the lienholder if you are leasing or financing the car and have an outstanding balance.
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Will the Car Insurance Company Buy a New Car After a Total Loss?
Some insurers will replace your car with a new vehicle without any penalty if it's less than 90 days old and if you have new car replacement coverage, an optional coverage that you can receive for an additional fee.
Most insurers will only reimburse you for your car's actual cash value the same day as the accident. The settlement you receive may or may not be enough to pay off your entire loan if you're financing or leasing a new car, and if you have an older car, the payout may not be enough to buy a new car.
Am I Covered for a Total Loss?
Your liability coverage won't cover your repairs. It only covers another driver's damages if you're at fault. An uninsured motorist policy covers your car damages if another driver hits you and they are uninsured.
- Collision coverage if you're at fault for an accident and hit another vehicle.
- Comprehensive insurance reimburses you for repairs caused by events out of your control, such as vandalism, theft, acts of nature and falling trees.
- Gap insurance can pay the difference between an outstanding loan balance and the settlement you received.
Filing a Car Insurance Claim for a Total Loss
1. File an Insurance Claim on a Totaled Vehicle
Contact your insurance carrier right away to file a claim. You'll need an accident report from the police. You'll also need contact and insurance information from the other driver as well as contact information from any witnesses.
The claims process may take up to 45 days, depending on the availability and workload of local adjusters. If a recent disaster has affected your area, you may have a long wait since adjusters have more vehicles to inspect.
2. Tow Your Totaled Car To a Repair Shop
You're not required to take your car to your insurer's preferred repair shop, but it may be more efficient in the end. An approved mechanic can give your insurance adjuster a full evaluation of your car's condition, damages and repair costs.
3. Get Your Paperwork
Retrieve your vehicle's sales receipt, taxes and the title documents you received when you first purchased your vehicle. Scan and send them to your insurance adjuster. Some states require the lenders to hold the title until you've paid it off, so you may not have one.
4. Research Your Vehicle's Value
Independently research your vehicle's value before your insurance adjuster gives you a settlement offer. You can search online using sites like Kelley Blue Book or Edmunds. You can also scan dealership websites for vehicles selling similar to yours. This research can help you determine whether or not your carrier has given you a fair offer.
6. Check Your Car Loan Balance
Finding out your car loan balance can help you find out whether your auto loan is greater than your vehicle's current value. You may have to finish paying off your loan with the settlement you receive from the insurance company unless you have gap insurance, which covers the remaining balance.
7. Submit Essential Documents To Your Carrier
Send all relevant documents to your insurance adjuster to ensure your insurer processes your claim quickly. Save copies of all documents that you submit to your insurance company. Track your paperwork to keep track of your claim's progress.
8. Get Your Insurance Settlement Offer
If you own your vehicle, the insurance company will pay your settlement directly to you. With financed or leased cars, your carrier will pay your settlement directly to the financing company based on your car's actual cash value and gap coverage (if you have it).
If your settlement doesn't cover the entire loan amount, you must pay the outstanding amount.
How Is the Value of My Car Determined?
Following your accident, your carrier will send an insurance adjuster to examine your car. This person will estimate your vehicle's value and determine whether it's worthwhile to repair it. The adjuster will consider the following factors:
- The odometer's reading
- The vehicle's body and its condition
- Wear and tear on tire treading
- Custom automobile features
Actual Cash Value vs Replacement Cost Value
The insurance adjuster will tell you whether your car is a total loss and propose a settlement. They will compare the prices of similar cars for sale in your area to calculate your vehicle's actual cash value (ACV). The carrier will add your state's sales taxes, title fees and registration costs to the baseline ACV amount.
If you have guaranteed car replacement or replacement cost coverage, your insurer will give you money to purchase a brand new car of the same make and model (minus your deductible) instead of its depreciated value.
If you don't believe the offer your insurer makes is fair, you can use your independent findings to counter the adjuster's estimates.
Can I Keep My Totaled Car?
You can't keep your car and receive a payout. After your insurer declares your vehicle a total loss, you'll have to give them the title before they will issue you a check.
Your insurance company may sell your vehicle at a salvage yard to recoup some of their money. Most insurers will allow you to buy back your vehicle after a total loss. Once you buy back the vehicle, you'll receive a salvage title and can buy rebuilt title insurance.
Most states won't allow you to register the salvage title until you complete your repairs and your car passes inspection.
Note that when it comes time to insure a salvage car, some insurance companies won't allow drivers to purchase collision or comprehensive coverage because they can't accurately estimate the current value.
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Do I Need Car Insurance While I'm Between Vehicles?
The best way to keep rates low is to have consistent coverage, even when you are between cars. The cheapest way to do this is to buy a non-owner car insurance policy and then switch to a regular policy once you buy the car of your choice. Insurance companies always ask if you've had any lapses in car insurance, and they don't mean just when you've been without a car. Not being insured is the surest way to get a rate increase.
How Long Should it Take To Receive the Check for My Totaled Vehicle?
It can take up to 45 days to get your claim payout after you submit all required forms. However, it may take even longer if there was a natural disaster that caused destruction to many cars, creating a backlog of insurance claims in your area.
Buy a New Car After a Total Loss with Help from Insurance
Your car is an essential asset that needs insurance protection before the worst happens. When purchasing coverage, consider options like comprehensive and collision coverage that can help you replace your vehicle if it is totaled in a wreck. Your insurance may only pay out the market value of the car, not what you owe so consider gap coverage if your car is eligible. However, some insurers offer new car replacement policies that replace your totaled car with a brand new one.
Ultimately, your coverage should address your personal needs. If you're not satisfied with your current coverage or the way your insurer handled a claim, SmartFinancial can help you shop for a new and affordable car insurance policy. Get a free car insurance quote by entering your zip code below.