If you are found to be at fault (liable) for a car accident, you can only collect money from your car insurance company for your vehicle damages. You must have Collision coverage on your auto insurance policy in order to make a claim for vehicle repairs or replacement. Collision insurance covers costs to repair or replace your car if it’s damaged or destroyed in a car accident, regardless of who is at fault. Collision insurance is optional in California.
The maximum amount of Collision coverage your car insurance company will pay is listed on your auto insurance policy declarations page. This amount is usually listed as “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.
In order for your car insurance company to pay out on a Collision insurance claim, you have to pay your deductible. A deductible is an amount of money you have to pay out-of-pocket before your insurance company will pay the rest of your claim. A Collision insurance deductible is 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.
What If My Car Is NOT Declared A Total Loss?
After an accident, your insurance company will complete a preliminary estimate. A preliminary estimate is an inspection of the visual damages of your vehicle, and an approximate cost of repairs. Your insurance company may send a representative to inspect your vehicle, or request that you bring your vehicle to an auto repair shop. You have the right to request that your vehicle be inspected at a convenient location, like your work parking lot or outside of your residence.
If the cost of repairs + the salvage value of your car is less than its Actual Cash Value, your car insurance company will pay for your car to be repaired. However, you would be responsible for paying your deductible toward the cost of repairs. If the cost of repairs is $15,000 and you have a $1,000 deductible, your insurance company would pay $14,000 for the repairs. You would have to pay the $1,000 deductible out of your own pocket.
There is no law requiring you to have your vehicle repaired by a shop selected by your car insurance company. You have the right to select the repair shop of your choice. Car insurance companies typically have a repair network with approved repair shops close to your home or business. If you choose to go through your car insurance company’s repair network, the repairs are usually warranted for as long as you own the vehicle. Many private auto repair shops also offer a warranty on repairs. It is also important to determine what kind of parts and the repair shop offers. For example, you may want a repair shop that offers Original Equipment Manufacturer (OEM) parts. Insurance company approved repair shops usually offer “like kind quality” parts, but not OEM parts. Before choosing a repair shop, be sure to check what kind of parts and warranty the shop offers.
Once a repair shop has been selected and your car is being repaired, the repair shop may do a supplemental damage estimate. A supplement is done when there are damages discovered during the repair process that were not visible during the preliminary estimate. The repair shop will submit the supplemental estimate to the at fault driver’s insurance company for payment.
When Is My Vehicle Declared a “Total Loss” or “Totaled”?
If the preliminary or supplemental estimate reveal significant damages and cost of repair, your insurance company may declare your car a total loss. California requires insurance companies to use a formula in determining 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 damaged car, which is usually determined by bids from salvage yards. To declare your car a total loss, the cost of repairs generally needs to be ≥75% of the Actual Cash Value.
For example, assume the cost to repair your car is $10,000, 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 $15,000, which is less than the ACV. Using the total loss formula, your car insurance company would not declare your car a total loss.
How Much Money Will I Receive for My Totaled Car?
The maximum amount you can collect from your car insurance company under your Collision coverage is the Actual Cash Value of your car minus your deductible. If your car’s ACV is $20,000 and you have a $1,000 deductible, your insurance company would send you a settlement check for the remaining amount of 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.
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 Actual Cash Value 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.
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. 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, your insurance company will deduct the salvage value of your car from the amount owed to you. If the Actual Cash Value of your car is $20,000 and its savage value is $5,000, your insurance company would send you a settlement check for approximately $15,000.
What If My Vehicle Has Significant Damages, But My Insurance Company Does Not Declare It A Total Loss?
In some cases, your insurance company will not declare your car a total loss, even when the cost of repairs is a large percentage of your car’s Actual Cash Value. If the value of your car is more than you owe on your auto loan, you may not want to keep a vehicle with significant repairs and a decreased re-sale value.
You may be able to invoke an “appraisal clause” through your insurance company, which allows you to obtain a damage estimate from a third-party appraiser. You would be responsible for the appraiser’s fee. The appraiser completes and submits a damage estimate to your insurance company. If the appraiser’s estimate shows that the cost of repairs exceeds the Actual Cash Value of your vehicle, you can request that your insurance company declare your car a total loss based on the appraiser’s damage estimate.