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Total-loss Claims

When a situation arises in which it would cost more to insurers to use a fair and reasonable method to restore a car to its original condition than to buy a similar replacement vehicle on the market, the situation is declared a “total loss”.

An insurance company may provide reimbursement for a car that is a total loss by offering a comparable vehicle in your local area, or has the alternative to pay cash settlement based on your car’s fair market value. Insurance companies must use a fair and reasonable method to determine the value of your vehicle. They must also tell you how they determined the value if you request this information.

Once you accept the insurance payment or sign an insurance settlement form, your claim is closed. There is an exception for first-party claims (claims that you file with your insurance company). You can ask your insurer to reopen your claim within 35 days of receiving payment if you cannot locate a comparable vehicle for the settlement amount. Your insurance company may do one of the following things. It can pay the difference between the market value of your vehicle and the cost of a comparable vehicle that you locate. Alternatively, it can locate a comparable vehicle for you or offer a replacement vehicle of the same make and year or newer. In the latter case, the car must be of a similar body style, have similar options and mileage, and be in as good or better overall condition than the destroyed vehicle. In these cases you have the right to inspect the vehicle before accepting it. Finally, it may initiate the appraisal clause in your policy. This exception does not apply for third-party claims (claims that you file with the other party’s insurance company).

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