What Three Factors Determine When an Insurance Company will Declare A Wrecked Vehicle as a Total Loss?

When your car is heavily damaged in a South Carolina motor vehicle collision it sucks. I know this from personal experience.

The automobile insurance company responsible for paying the damages claim will have to make some quick decisions. 

This post explains the insurance decision-making thought process in determining whether to declare a vehicle as a total loss.

1. Assess the Pre-collision Value of the Damaged Vehicle

The first factor an insurance company adjuster is going to quickly assess is the approximate value of the damaged vehicle. Insurance companies can make this preliminary assessment based upon the vehicle's age, make, and model. 

2. Cost to Repair

The second factor it will assess is the cost of repairing the vehicle. The adjuster should interview the owner and find out where the vehicle was damaged in the crash.  

To finish the repair cost assessment, most insurance companies employ a property damages repair expert. This person will go to the vehicle and thoroughly inspect it. Afterwards, he will send a written repair estimate and pictures to the property damages adjuster. 

In some cases, an insurance company may have the vehicle inspected by a repair facility. In such cases, the facility will provide an estimate of the repair cost. 

The more expensive the repair estimate, the more likely it is that there will be cost over-runs. Once repairs are underway, it is not unusual for a repair facility to realize that more parts were broken in the crash. Or, while repairing the vehicle, a mechanic may determine that the frame was damaged. 

3. Weighing The Factors (Fifty Percent) 

The final factor made is a comparison of the first two factors. It can be expressed as a formula that looks like this: 

It is an easy decision to total a vehicle when the repair costs exceed the market value. Here is the example expressed as the formula:

Once it clear the repair costs will exceed the value, the insurance company will just declare the vehicle a total loss and pay the value ($8,000) instead of undertaking repairs ($10,000). 

Even when repair costs are less than the value, smart insurance companies will usually total a vehicle when costs exceeds 50% of value. Here is an example:

  

This is somewhat surprising. At first glance most people assume that if a vehicle can be repaired for less than its value, then fixing it is economically justified. However, there are other damages compensation due that make repairing such damage a risky option. When extensive repairs are made to a wrecked vehicle, supplemental property claims for more money can and should be made. These supplemental claims include the following: (1) Loss of use claims; (2) Repair cost over-runs; and (3) Diminution in value. 

South Carolina law requires a salvage title when the repair costs exceed seventy-five percent of the vehicle's fair market value.  (See South Carolina Salvage Titles) Salvage titles will drastically and negatively affect the resale value of your vehicle.

Don't expect an insurance company to voluntarily tell you about the extra money to which you may be entitled. Be alert! A sneaky or dumb insurance company may try to repair a damaged vehicle even when the estimated repair costs exceed fifty or even seventy-five percent. 

The insurance company is hoping you don't realize you are being under-compensated.  That's what this blog is about. Education.

If you encounter a dumb insurance company, visit the links below to read about how to make the additional compensatory damages claims so you can get all the money you deserve. 

How To Maximize Your S.C. Property Damages Insurance Claim Money

Handling A South Carolina Automobile Insurance Repair Claim

How to Make a South Carolina Automobile Property Damages Claim Without an Attorney