Car Accidents

Few things are worse than an unexpected car accident. In addition to sustaining serious physical injuries, you may have to deal with damage to your vehicle. This will probably include many conversations with an insurance company. The insurer will assess the damage to your car and determine how much it will cost to fix any issues. If the cost of repairs is greater than how much your car is worth, an insurer will explain that your car has been totaled.

What Does It Mean When a Car is Totaled?

Your car will be considered totaled, or a total loss, when it would be economically unreasonable to pay to have it fixed. In fact, insurance companies have a legal obligation to declare a car a total loss when the cost of repair is too high. Generally speaking, a car will be considered totaled when the cost of repair exceeds the car’s actual cash value.

Actual cash value is simply what the car is worth right before it is damaged in the accident.

Many states have set arbitrary thresholds to determine when a car is totaled. For example, in Nevada, a car is totaled when the cost of repairing the vehicle exceeds 65% of its actual cash value. In California, there is no set threshold. Instead, insurers must use a special total loss formula.

What is a Total Loss Formula?

The total loss formula allows insurance companies to determine if it’s economically responsible to pay to have your car fixed after an accident. A car will be considered a total loss if the cost of repair plus the vehicle’s salvage value is greater than the vehicle’s actual cash value.

Determining the Cost of Repair

The first element of the total loss formula is the cost of repair. An insurance adjuster will go over your vehicle in great detail after an accident. They’ll identify any issues and project how much each will cost to repair. The cost of repair will include new parts as well as labor. Most insurance companies have a reference guide that can tell them exactly how much it will cost to repair or replace a particular component.

Salvage Value

Insurance companies also consider how much your car is worth in its current damaged condition. This is known as the salvage value. Many factors can influence the salvage factor, including how much of the vehicle was damaged in the accident, the condition of non-damaged components, and how much someone may be willing to pay to buy the vehicle in its damaged condition.

Calculating Actual Cash Value

The actual cash value of your car is often much less than you think. Even if you’ve just purchased a new vehicle, its actual cash value plummets the moment you drive it off the lot. Many factors influence your car’s value, including:

  • Year of manufacture
  • Make and model
  • Interior and exterior condition
  • Mileage
  • Existing damage, and
  • Vehicle maintenance.

There are many tools available to assess a vehicle’s actual cash value, including online resources such as Kelley Blue Book.

Your insurance company will consider every factor when determining how much your car was worth at the time of your accident.

Example: You’re involved in an Orange County car accident. At first glance, it doesn’t appear that the damage to your vehicle is too extensive. However, your insurance company determines that the car’s frame is now bent. The cost of repairing the frame and other damage is estimated to be $12,000. They also put the salvage value of the vehicle at $2,000. At the time of the accident, the actual cash value of your vehicle is $13,000. The cost of repair plus the salvage value of the car equals $14,000. Since this is greater than the car’s ACV, your car will be considered totaled.

What Can I Do If My Car is Totaled?

You have at least two options if your car is totaled in an Orange County car accident.

First, you can accept a check from an insurance company for the vehicle’s actual cash value. The insurer will issue a salvage title, pay you for what the car was worth before the accident, and take ownership of the totaled vehicle.

Second, you can negotiate a settlement with the insurer and retain title of the vehicle. In these situations, the insurer will not cut you a check for the car’s full ACV. Instead, they may agree to pay you a percentage of the ACV and let you keep the vehicle with the new salvage title. When you retain ownership, you can try to have to car fixed yourself or sell it for more than you’d get from the insurer. However, it’s important to understand that there are certain limitations when you have a vehicle with a salvage title. Even after the car is fixed, you’ll find that insurance rates may be much greater.

What If the Car Was Leased or Financed?

You don’t technically own your car when it is financed or leased. Instead, a finance company retains legal title. When a leased vehicle is in an accident, the finance company will receive a check for the ACV of the totaled vehicle. You may or may not get a portion of the proceeds, depending on how much of the car loan is outstanding. If you still owed a significant portion of the loan, chances are you’ll receive nothing.

It’s always important to consider GAP insurance if you lease or finance a car. Benefits from a GAP insurance policy can protect you in the event that you owe more than your car is worth. When this happens, you could be responsible for paying the finance company the difference between what insurance pays for the vehicle and what it’s worth to the finance company.


Have you suffered a total loss in an Orange County car accident? Contact the Law Offices of John Rapillo for legal assistance. Our experienced personal injury lawyers will explain your rights and help you negotiate the best possible outcome with an insurer. Your first consultation is free, so call for help today.