By understanding insurance and how it works in the case of a total loss situation, you can avoid some surprises down the road! Here’s a scenario.
You’ve been involved in an accident and your car is damaged. The car is subsequently moved to a repair shop or wrecker yard where an insurance company appraiser is assigned to assess your damages. Subsequent to that appraisal the insurance company determines that the cost to repair your car exceeds 80% of the value of your car. Translated – your vehicle is a total loss!
Shortly thereafter, you are presented with a settlement amount, a stack of paperwork, and eventually a claim check for your loss.
Time and time again, this process is carried out, generally without much opposition. But what if you believe the insurance company’s valuation is too low? Or, what if you want to keep your total loss car? What are your options?
In Florida, state laws require that when an insurance company pays for a total loss, the Title must be transferred to the insurance company. Insurance companies satisfy the requirements of the law first by having the owner sign over the Title, and then by applying for either a Salvage Title or a Certificate of Destruction. Either way, once your car is declared a total loss, ordinarily it is not yours to keep.
Take note of “ordinarily”. In fact, Florida law does provide some narrow options. But in order to even consider those options, first it is necessary to examine how insurance companies define the “value of your car”.
Insurance companies call it “ACV”, which stands for Actual Cash Value. Simply put, this number is supposed to represent the value of your car on the date of the theft or accident. But how is this number determined?
Florida law requires that the value of your total loss vehicle must be based upon “current retail cost of the vehicle, as established in any official used car guide”. Consequently, insurance companies are compelled to rely on reasonable, official sources such as NADA or Blue Book. But insurance companies almost always adjust “current retail cost” by applying other rating factors. These adjustments usually do affect the value of your car, as insurance companies deduct for poor condition and high mileage. The end result is the ACV.
A word of caution. Insurance adjusters almost always have a range of values for your total loss. Assume that the first offer is at the bottom of that range. With some negotiation, you should be able to arrive at a higher, more equitable value.
In order to effectively negotiate, you must estimate the value of your car on your own. You can access NADA or Blue Book online. Apply objectively the same adjustments that an insurance company is likely to use. And, check used vehicle dealer prices. In other words, do not accept the insurance company’s ACV offer without knowing yourself the fair value of your car.
Once you have established that value, you are in a better position not only to negotiate a better settlement, but perhaps also to negotiate keeping your car, if that’s what you want.
Florida law offers two exceptions to the total loss rule.
First, if the ACV of your vehicle is $1500 or less, the law does not apply. What this means is that even if the cost to repair the car exceeds 80% of its value, you can receive a settlement and you can keep the car.
Second – and a long shot – Florida law provides this exception for car valued over $1500, ” A motor vehicle or mobile home shall not be considered a “total loss” if the insurance company and owner of a motor vehicle agree to repair, rather than to replace, the motor vehicle”.
Realistically speaking, there are two rather large downsides to this second option.
One – consider it highly unlikely that an insurance company will agree to repair a vehicle that is statistically a total loss.
Two – On the outside chance you can get the insurance company to repair your total loss vehicle, if those repairs will exceed 100% of the value of the vehicle, Florida law requires you to notify the Department of Highway Safety & Motor Vehicles “within 72 hours after the agreement, a request to brand the certificate of title with the words “Total Loss Vehicle.” Unless your vehicle is a sentimental keepsake that you never intend to sell, this permanent brand will forever negatively impact its value.
Generally speaking, accept the reality that if the damage appraisal reaches 80% of your vehicle’s actual cash value it is a total loss and you will be required to sign the Title over to the insurance company. Just make sure the ACV settlement offer is fair!