'Totaled' Car: Let's Get This Straight

SPECIAL TO THE TIMES

Other than hearing that your policy has been canceled, it's about the worst news you can get from your auto insurer: Sorry, your vehicle has been "totaled."

But if you loved that car or truck, totaled doesn't always have to be the death sentence that the term implies.

A totaled vehicle isn't always a mangled mess. Sometimes it's salvageable. And even if it can't be saved--or you chose not to try--the settlement your insurer offers isn't necessarily the best you can do.

Insurers base their decisions on the cost to them of fixing the damage versus paying you a lump sum to give up all claims to the vehicle, which they then sell to a scrap yard. The decision to declare a vehicle a total loss is made when the cost of repairs gets close to the vehicle's current market value. For most insurers, it's totaled if repairs add up to 75% or 80% of market value.

So an older, less valuable car or truck with just a bit of damage might be deemed a total loss, while a newer vehicle with extensive damage might be judged repairable.

Whether you're dismayed or relieved to hear that your ride has been totaled, it pays to know your rights and your options, including your right to appeal if the cash settlement offered for the total loss seems low.

You also have the right to buy the vehicle back from the insurer and get it repaired yourself--something that might appeal to someone with a heavily modified car or off-road vehicle loaded with expensive engine and suspension parts that the insurer doesn't factor in to the market value calculation.

And you should exercise those rights. After all, although insurers want to minimize their losses in payouts, they also want to keep you happy enough to remain a customer.

Suppose the repair estimate is $4,000 but the cash or market value of your vehicle is only $3,000. Even if it's possible to repair the vehicle, the insurance company would declare it a total loss, says Dave Hurst, a spokesman for State Farm Insurance.

If the repair estimate is less than, but close to, the cash value, it could also be declared a total loss, says Phil Gross, a senior insurance compliance officer for the California Department of Insurance and a supervisor of its consumer hotline.

(The hotline--[213] 897-8921--is staffed weekdays from 8 a.m. to 5 p.m. to answer questions about auto coverage and other insurance.)

Once you get word that your car or truck has been declared a total loss, you have several options.

* You can ask the insurer to find you a similar car to replace yours. Whether the insurer would actually go out and acquire a replacement depends on the company. At State Farm, for instance, Hurst says the company might help a policyholder find a car but would not get involved in the purchase.

* You can accept the cash settlement offered and buy another vehicle on your own. But be sure the insurance company is paying you the actual market value, cautions Jack Gillis, a spokesman for the Consumer Federation of America, an advocacy organization. You have the right to appeal if you think the offer is too low.

* You can negotiate a deal to buy back the vehicle from the insurer, a transaction that typically will subtract from the final cash settlement offer whatever the insurer could have gotten for the wrecked vehicle from a salvage yard.

In all cases, you are legally entitled to know how the insurer arrived at the cash settlement value.

Insurance companies tend to use databases such as CCC Information Services (http://www.ccis.com), while consumers often turn to databases such as the Kelley Blue Book (http://www.kbb.com) or the National Automobile Dealers Assn. (http://www.nadaguides.com).

Whichever database is used, the insurance company has an obligation to restore you to your pre-accident status, vehicle-wise. That doesn't mean a duplicate of the vehicle you've lost, but if the Kelley Blue Book, for instance, is used to establish your damaged vehicle's market value, figure that your insurer should offer you something in between the trade-in or "low blue book" value and the retail or "high blue book" value, Gillis says.

If you think the settlement offer is too low, appeal it. If you think there are factors or features your insurer overlooked, such as the car being a classic or being outfitted with aftermarket equipment that increased its value, include that data in your appeal letter, says Hurst of State Farm.

Recently, when my son's 1996 Dodge Neon was totaled, the insurer offered a net settlement of $4,840.

This sounded low. In an appeal letter, we included an article from an insurance information Web site (http://www.insure.com) spelling out an insurer's obligation to put you back where you were before the accident, plus several ads from the Los Angeles Times classifieds and an online used-car site (http://www.autotrader.com), listing 1996 Neons with similar features and mileage at higher prices. We asked for $6,000 to $6360.

A few days later, the insurer agreed to give us $6,025, just $75 less than the "high blue book" value. After factoring in the sales tax and a refund of the unused portion of the Neon's registration--they're required to do that under California law--and backing out the $500 deductible, the insurer ended up writing us a check for $6,108.

Once you accept a settlement, that's not necessarily the end of negotiations.

"If within 35 days you cannot find a comparable car, go back," Gross suggests. 'They have to open up the claim again.'

And if your car is declared a total loss but you don't want to give it up, you can try to buy it back from the insurer.

Before deciding on this plan, Gillis warns, get some idea of what your mechanic or body shop would charge for repairs. And realize there might be hidden damage that could increase the final bill.

Your insurer will probably get a bid from a salvage buyer on the vehicle and deduct that amount and your own policy deductible from the cash value payment to you.

For instance, if your car is worth $3,000 but repairs would be $3,800, the insurer would want to total it. If you want to buy it back, you would get the $3,000 cash value, minus what a salvage bidder offered--$300 or so--and your deductible. You pay the salvage bid, explains Gross, because that is money the insurer could have recouped by totaling the car and selling it to the salvage yard.

If what's left is sufficient to repair your vehicle--or if you are willing to dig into your own pocket because you don't want to part with the car or truck, you can then get it fixed on your own.

But there's still the matter of the post-accident title and registration of a car that has been totaled.

"In California and most other states, we would be required to notify the DMV" that the car had been declared a total loss, says State Farm's Hurst. After that, the title will always show that the vehicle was salvaged. That's so that any future buyers will know that the car had been severely damaged and totaled.

Additionally, your repaired vehicle must pass DMV inspection before being re-registered. And while the insurance company probably would continue to cover it, there may be restrictions that could include eliminating coverage for any future accident repairs, Gross says.

There's one more scenario: you're in an accident but not at fault, so you have to deal with the other driver's insurance company, which wants to total your car.

You are under no contractual obligation with the other party's insurer, as you are with your own, Gross points out. So if you want to keep the car, he suggests you establish the value and collect repair bids to determine whether the car can be fixed for less than that. If so, you can approach the other party's insurance company with your research results and ask that they repair your vehicle instead of junking it.

"Both parties have to agree or there is no settlement," Gross says.

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Highway 1 contributor Kathleen Doheny can be reached at kdoheny@compuserve.com.

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Tips for Picking Up the Pieces

Few motorists want to hear an insurance adjuster pronounce their vehicle a total loss after an accident, but it happens. If it happens to you, here are some tips for making the experience as painless as possible:

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1. If you think the insurance company's settlement offer is too low, survey prices for similar vehicles in newspaper and Internet ads and submit them to your insurer.

2. Receipts for aftermarket additions, especially things such as fancy wheels and custom paint, can also help boost the value and the size of your settlement check.

3. Ask your insurer to find an equal-quality replacement vehicle for you. Some might do that.

4. If you or your insurer cannot find a suitable replacement within 35 days, your case can be reopened and the settlement renegotiated.

5. If the vehicle is repairable but was "totaled" because the cost of fixing it exceeds the insurer's guidelines, you often can buy it back out of your settlement and arrange repairs on your own.

6. Cars repaired after being totaled must pass a DMV inspection, and the title will always indicate that the car was salvaged. That can make it difficult to sell.

7. Salvaged cars often cannot be insured for future accident repairs.

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Sources: California Department of Insurance, State Farm Insurance, Consumer Federation of America

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