Partnering with the right insurance provider will make a world of difference if you are involved in a total loss accident. While a good insurance company will handle much of the claims process, you will still be responsible for providing essential information about your vehicle. With that in mind, we have created this comprehensive guide that answers the question: “How do I calculate a total insurance loss for my car?”
Our experts can help you to calculate a total insurance loss following an accident. Making accurate calculations will be essential if you want to get the proper payment for your lost vehicle.
It is also vital that you protect your investment by partnering with a reputable company. If you are looking for a new insurance provider, you can take advantage of our rate comparison tool below. Simply enter your zip code and obtain multiple quotes from the industry’s best car insurance companies.
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How to Calculate Total Loss for Car Insurance
There are three key factors to consider when calculating total losses: total loss threshold, actual cash value (ACV), and guaranteed asset protection (GAP) insurance. Insurance companies evaluate your claim using these three figures. The goal of using these factors to determine loss is to perform an accurate assessment of your car’s value. Once the insurance company has compared the ACV to the total loss threshold, it will decide whether your vehicle is a “total loss” or if it is worth repairing.
Auto insurance companies are far from perfect, and many companies often assume that your vehicle was in “fair” condition, which can drive down the ACV. That is why it is important to keep maintenance and repair records. This allows you to prove that your vehicle was in good working order prior to the accident.
Even if the insurance provider determines that your vehicle is a total loss, you’ll want the company to value it appropriately. Ideally, there would be enough value in your vehicle to pay off any outstanding loans and leave you with some funds for a replacement. However, this is not always the case.
How to Determine Your Total Loss Threshold
The total loss threshold acts as the insurance company’s “measuring stick” to determine whether your vehicle is worth salvaging. It is used by a claims adjuster to determine whether a vehicle is a total loss or approved for repairs. A vehicle will be a total loss if the repair costs exceed the vehicle’s actual cash value.
The total loss threshold will vary from provider to provider. However, most providers set the threshold at approximately 75% of the vehicle’s actual cash value. For example, if your vehicle’s ACV is $10,000 and the repairs cost $7,600, then it will be declared totaled.
If you want to determine the exact dollar amount of your vehicle’s total loss threshold, you will first need to obtain the percentage used by your insurer. You will then need to calculate your vehicle’s ACV. From there, you can determine how costly repairs will need to be for your car to be declared a total loss.
How to Determine Your Car’s Actual Cash Value
Your vehicle’s actual cash value is determined by a variety of factors. It is influenced by the make, model, and year of your vehicle. Cars with higher-end equipment packages will also receive a higher ACV than similar vehicles with bare-bones accessories. The overall condition of your vehicle will also impact the ACV.
If you want to get a fairly accurate estimate of your vehicle’s ACV, Kelley Blue Book (KBB) is a great place to start. KBB offers several different valuation options, including the sale, purchase, and trade-in values. Select the sales value for your vehicle to obtain the most accurate ACV. When you’re calculating ACV through the KBB application, make sure to input accurate vehicle information. Making a mistake, like selecting the wrong equipment package or vehicle condition, will throw off the valuation estimate.
When your vehicle is involved in an accident, the insurance company will use their own claims adjusters. If you believe that the claims adjuster is offering an unfair assessment, seek out quotes from multiple body shops. If these independent shops are consistently providing much better assessments, the claims adjuster will likely reevaluate the value of your vehicle.
When GAP Insurance Comes into Play
Insurance providers use your vehicle’s ACV to determine how much they will pay out on a claim. If the company elects to have your vehicle repaired, the policy will cover the total cost of parts and labor. However, if the company declares it to be a total loss, you could be placed in a tough financial situation.
That is where guaranteed asset protection, or GAP insurance, comes into play. GAP is designed to make up the difference between your vehicle’s ACV and the amount that you owe on it.
For instance, let’s say that you still owe $20,000 on your vehicle when it is declared to be a total loss. Perhaps its ACV is only $16,000. Without GAP insurance, you would still owe your finance company $4,000 and be forced to purchase a new vehicle. GAP will pay the difference, allowing you to start fresh with a new vehicle.
While GAP is a great choice for many drivers, it is not the only option. Several major auto insurance companies offer add-on coverage, such as new car replacement. This policy will pay out the value of a brand-new vehicle of the same model and make as your current ride. This will ensure that a total loss crash does not leave you struggling to purchase a replacement vehicle.
Our Recommendations for Auto Insurance
Now that you know how to calculate a total insurance loss for your car insurance, it’s time to find a trusted insurance provider. To get free quotes from top providers in your area, enter your zip code below.
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GEICO: 9.5 out of 10.0
Our experts rated GEICO as the best overall auto insurance provider. The company earned a score of 9.5 out of 10.0 for industry reputation. It rounded out its scores with 9.0s across the board in the customer experience, cost, and coverage categories.
GEICO is known for providing excellent coverage at affordable prices. The company offers several unique add-ons, including mechanical breakdown insurance and rideshare insurance.
Progressive: 8.9 out of 10.0
While Progressive did not earn the top overall score, our experts still rate the company very highly. Progressive earned a 9.5 for reputation, a 9.5 for coverage, and an 8.5 for cost and customer experience. We named the company the best for high-risk drivers.
Oftentimes, large insurance providers are unwilling to work with high-risk drivers. Fortunately, Progressive specializes in doing just that. The company also offers various discounts and coverage for custom parts and equipment.
The Detroit Bureau collects data from every major car insurance provider to formulate rankings of the best insurers. Our in-depth rating system takes into account market share, coverage, pricing, customer satisfaction and ratings from industry experts. Each insurer is given a weighted score in four categories, as well as an overall score out of 10.0.
We recommend auto insurance companies based on these rankings, but we also encourage you to perform your own research and compare quotes to find the best coverage.