Should I keep my car after a total loss?

If you are in an auto accident, statistics say it will likely be a fender-bender. But even minor damage to your car could be enough for the insurance company to deem it a total-loss.

What does the insurance company do with your smashed car?

If your insurance company declares your car a total-loss you will receive the market value of the car minus your deductible.  The insurance company takes ownership of the car and will sell it at salvage auction in order to recoup some of the cost of the claim.

Any vehicle totaled by an insurance company must have a “salvaged” title. This protects any future consumer that may buy the vehicle.  No one would want to purchase a car that had been totaled without their knowledge.

A Common question people have when this happens is, “Can I keep the car?” The better question is, “Should you keep the car?”

Not all total-losses are equal.

Cars are insured for what they are worth (called actual cash value).  The actual cash value determination in Oklahoma is set by guidelines set by state law. Insurance companies will typically declare a total loss when the cost to repair exceeds roughly 60% of the value of the car.  Obviously a $2500 car would be a total loss with much less damage than a $25,000 car.

Here is a general idea of how to calculate what you could expect to collect from an insurance company if you decide you want to keep the car after it is declared a total-loss.

The insurance company will start with the market value of the car, subtract your deductible, and subtract the estimated salvage value of the car.  The remaining amount will be paid to you and the damages are your responsibility to repair. Before going this route you should be certain that the repairs can be made at a cost that will be practical.

Hail damage is much different than damage from a t-bone collision, but both losses could result in a total-loss. So choosing to keep a car with minor (cosmetic) damage may make sense in some cases. But one that’s been t-boned would be a bad idea to keep.

 

You should also keep in mind that choosing to keep a totaled vehicle has future consequences as well.
  • A car that has been totaled, even if completely repaired will never have the same market value as a non-totaled car. Insurance companies submit the vehicle identification number of the vehicle into an insurance database that identifies it as a totaled vehicle.
  • In most cases insurance companies will not allow you to carry physical damage coverage on the car, even if it has been repaired.  It will be a “liability-only” policy. Some insurance companies will not insure the vehicle at all.

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What do I think?

If an insurance company declares a car a total loss, I would recommend keeping it only in rare circumstances.  The primary concern would be the type of damage the car sustained.

If it’s from a collision, there could be hidden damage which could be costly and dangerous, even if repaired. If it’s minor and strictly cosmetic damage an argument can be made for keeping the car. But you should have a clear understanding that the car will never be valued the same as it was before the damage.

Having an insurance agent who can discuss the pros and cons of your insurance decisions is a valuable relationship. Getting advice online from a blog like this one may be a good place to start, but input from an insurance professional shouldn’t be dismissed.

We would welcome the opportunity to have a conversation with you about your insurance plan. We can help you build the most effective and cost efficient plan.

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