If there are significant damages to your vehicle after a car accident, an insurance company can declare your car a “total loss,” or totaled. California requires insurance companies to use a formula to determine if a vehicle is a total loss. California’s total loss formula is: Cost of Repairs + Salvage Value ≥ Actual Cash Value. The salvage value is the value of your totaled car.

For example, assume the cost to repair your car is $18,000, your car’s salvage value is $5,000, and the Actual Cash Value of your car is $20,000. The cost of repairs + salvage value is $23,000, which is more than the Actual Cash Value. Using the total loss formula, the insurance company would declare your car a total loss. The insurance company will pay for your car after it is declared a total loss.

Whose Insurance Company Will Pay for My Totaled Vehicle?

If your vehicle is declared a total loss from a car accident caused by another driver, you can collect compensation from the at fault driver’s insurance company OR your insurance company. You must have Collision insurance coverage in order to obtain compensation from your insurance company. It is important to know that your insurance payments (premiums) will not increase if you use your insurance to pay for car repairs from an accident you did not cause.

The amount of money you can collect for your vehicle is the Actual Cash Value or “ACV.” In California, Actual Cash Value is the fair market value, or the dollar amount a knowledgeable buyer is willing to pay, and a knowledgeable seller is willing to accept. Car insurance companies typically define Actual Cash Value as the amount that it would cost to buy a comparable vehicle at the time of your car accident. A comparable vehicle is one with the same make, model, year, mileage, options, and physical condition. Most car insurance companies rely on a third-party company called CCC (Certified Collateral Corporation) to provide an evaluation report on the market value of your vehicle.

There are advantages and disadvantages of seeking compensation through the at fault driver’s insurance company or your insurance company. Let’s take a look at both options.

Advantages of Going Through the At Fault Driver’s Insurance Company

• You don’t pay anything. The at fault driver’s insurance company will compensate you for the Actual Cash Value of your vehicle up to the maximum amount of the at fault driver’s insurance coverage. You do not have to pay any money out of pocket.

• Rental Car Fees. The at fault driver’s insurance company will pay for you to have a rental vehicle from the date of your car accident to the date the insurance company sends you a settlement check for the Actual Cash Value of your car.

• Loss of Use of Your Car. You can collect compensation for each day that you don’t have use of a vehicle after your car accident. This compensation is known as Loss of Use damages. Loss of Use damages begin on the date of your car accident and end when you are provided with a rental car or the insurance company sends you a settlement check for the Actual Cash Value of your car. Loss of Use damages are typically calculated using the daily rental rate of a similar make and model vehicle.

For example, assume you had a Toyota Camry that was totaled in your car accident. The at fault driver’s insurance company provides you with a rental car 4 days after your accident. The insurance company mails a settlement check to you for the ACV of your car 14 days after your accident. Because you had a rental car for 10 days, you did not have Loss of Use damages for those days. However, you can collect compensation for the 4 days you were without a car after your accident. If the daily rental rate of a similar, full-size vehicle is $40 a day, you could collect $160 in Loss of Use damages.

Disadvantages of Going Through the At Fault Driver’s Insurance Company

• Not Enough Insurance Coverage. The at fault driver may not have enough property damage liability insurance to cover the Actual Cash Value of your car. California requires drivers to have a minimum of $5,000 in insurance for damages to other vehicles. If the at fault driver has the minimum coverage of $5,000, and the ACV of your car is $20,000, that driver’s insurance company would only pay you $5,000.

• Delayed Payment. The other driver’s insurance company will need to conduct an investigation to determine who was at fault. Even if you did nothing to cause the accident, the investigation will take time. Insurance agents will often drag their feet in completing their investigation and sending you a settlement check for your car.

• Awful Customer Service. The goal of car insurance companies is to save money. The way they save money is to deny or reduce the value of your claim. Insurance agents will pretend to be on your side, while only looking out for their own best interest. Insurance agents will often intentionally delay resolution at every step of the process.

Advantages of Going Through My Insurance Company

• Quicker Resolution of Your Claim. Because your Collision insurance covers the cost of repairs regardless of who is at fault for the accident, your insurance company will not have to conduct an investigation before paying for repairs. This can potentially speed up the process by weeks, if not months.

• At Fault Driver is Uninsured or Underinsured. If the at fault driver does not have car insurance, or does not have enough insurance to cover the Actual Cash Value of your car, you can use your Collision insurance coverage to fully compensate you for your car’s Actual Cash Value.

• Better Customer Service. Your insurance company wants to provide good service to keep your business. Insurance adjusters make an effort to answer and return your telephone calls, explain your insurance coverages, and provide your options.

Disadvantages of Going Through My Insurance Company

• Deductible. You will have to pay a deductible in order for your car insurance company to pay for your vehicle through your Collision insurance. A deductible is an amount of money that you have to pay out-of-pocket before your insurance company will pay out on a claim. Collision insurance deductibles are usually $0, $500, or $1,000. If you choose a lower deductible, your monthly payment will increase. If you choose a higher deductible, your monthly payment will decrease.

For example, if the Actual Cash Value of your car is $20,000 and your deductible is $1,000, your insurance company would send you a settlement check for approximately $19,000. Insurance companies are also responsible for paying you for costs associated with purchasing a new vehicle, such as sales tax, title, and vehicle registration. It is important to know that your insurance company will reimburse you for the amount of your deductible if and when it recoups the money from the at fault driver’s insurance company.

Exception to Paying Deductible. Your insurance company can choose to waive your deductible. Usually, there are several requirements before a car insurance company will waive the deductible, including: (1) the cost of your car repairs must be more than your deductible, (2) another driver must be at fault for the car accident, (3) the at fault driver must have car insurance, and (4) the at fault driver’s car insurance company must accept fault.

• Rental Car Fees. Your car insurance company will only pay for your rental car fees if you have rental reimbursement coverage. Otherwise, you will have to make a separate claim with the at fault driver’s insurance company to be reimbursed.

• Loss of Use of Your Car. You can collect compensation for each day you don’t have use of a vehicle after your car accident. This period of time is known as Loss of Use. Your insurance company will not pay for Loss of Use damages. You would have to make a separate claim for Loss of Use with the at fault party’s insurance company to be compensated.

Can I Keep My Car After It Has Been Declared a Total Loss?

Yes. You have the option to retain possession and ownership of your totaled car. This is true if you go through your insurance company or the at fault driver’s insurance company. If your car has sentimental value or you want to repair or sell your totaled car, this option may be for you.

If you choose to retain possession of your totaled car, the insurance company will deduct the salvage value of your car from the amount owed to you. Let’s assume the salvage value of your car is $5,000. After subtracting this amount from the Actual Cash Value of $20,000, your insurance company would send you a settlement check for approximately $15,000.

What If I Owe Money on My Auto Loan When My Car Is Totaled?

If you owe money on an auto loan at the time of your car accident, the insurance company will send some or all of the Actual Cash Value of your car to the lienholder. If you owe less than the ACV, you will receive a settlement check for the amount remaining after your car is paid off. If you owe more than the ACV, you will still owe the lienholder the remaining balance of your auto loan.

For example, assume the ACV of your car is $20,000 and you owe $10,000 on your auto loan at the time of your car accident. The at fault driver’s insurance company would send a check for $10,000 to your lienholder to pay off your totaled car, and would send you a check for the remaining $10,000. If the ACV of your car was $10,000 and you owed $20,000, a check for $10,000 would be sent to your lienholder, and you would still owe the remaining $10,000.