It is always frustrating when you get in a car accident. But it is an added headache when the insurance company declares that it is a total loss. If this has happened to you, it is critical to understand what total loss is and what it means for the amount of money you will receive from your insurance company.
What Does Total Loss Mean in Houston?
When most people hear the term “totaled,” they think of a car that is completely destroyed. But in Texas, the total loss does not mean that the car is beyond repair. Instead, it means that it is not worth repairing because the estimated cost of repairs exceeds the car’s actual cash value.
Texas law provides a formula that insurance companies use to determine whether a car is totaled: The sum of the cost of repair plus the car’s salvage value exceeds the actual cash value.
The actual cash value refers to how much the car was worth immediately before the accident. It does not refer to the cost of replacing the vehicle with a new car or the amount you originally paid for it. The insurance claims adjuster uses a combination of dealer surveys, value guidebooks, online pricing sites, and private party sales to make this determination.
The salvage value is the vehicle’s worth in its damaged state. It is the amount of money that the car is worth if it was scrapped and salvaged for its parts. A claims adjuster makes this determination after the damage to the vehicle has been assessed.
As an example, imagine that your Chevy Cruze was involved in an accident. Your insurance company would complete the below calculation to decide it is a total loss:
• Actual cash value: $18,000
• Cost of repairs: $5,000
• Salvage value: $10,000
• Sum of salvage value plus repair cost: $15,000 (less than 100% of actual cash value)
• Result: The car is not declared a total loss
What Happens if Your Car is Declared a Total Loss in Houston?
If your insurance company decides that your car is totaled in Houston, they can decline to repair it. You have the option to surrender your damaged car to the insurance company and receive a settlement in the amount of the car’s actual cash value. Under Texas law, insurance companies must also pay applicable taxes and title costs if the policyholder purchases a replacement vehicle. The assumption is that you will use the insurance payout to buy a car that is comparable to your pre-accident vehicle.
You can also decide to keep the totaled vehicle, but your insurance company will typically deduct the car’s salvaged value from the amount it would have paid you. Additionally, you will have a salvaged title for the vehicle, making it difficult to sell and increasing your insurance premiums. Before getting a new title from the Texas Department of Motor Vehicles, you would need to get the car repaired.
What if You Disagree That Your Car Is a Total Loss in Houston?
A determination that a car is totaled is subjective. Sometimes insurance companies manipulate the calculation of actual cash value to their advantage and pay you less than you deserve. If you disagree with their decision, you have the right to challenge it. A qualified insurance attorney can assist you through the process and help you get the compensation that you deserve.
An experienced Houston attorney will gather and present factual evidence regarding the car’s actual cash value to the insurance company. They will look to various sources, including online guidebooks (i.e., Kelley Blue Book), quotes from used car dealers, and documented special features or special parts on your car. Your attorney will negotiate with your insurance company and argue that the facts and law are on your side.
Sometimes negotiations are not successful. If negotiations fail, your attorney can file a lawsuit in court. They will present evidence to the court and advocate aggressively on your behalf. In some cases, you may be entitled to not only what the insurance owes you but additional damages if your attorney can prove the insurance company acted in bad faith.
Your Houston Insurance Claim Attorney
If you have questions about your car insurance claim, call the Paxton Law Firm. Let us review your case and advise you of your rights. The Paxton Law Firm believes in taking the stress of dealing with your legal battles and turning a negative situation into the best possible outcome lady justice allows. We offer free consultations, and you do not pay any legal fees until we recover for you.
