My Vehicle is a ‘Total Loss’. What does that mean for me?
When your vehicle is declared a total loss after an accident or damaged from a covered loss, understanding the claims process can help you make good choices. This consumer advisory explains how insurance companies in Maryland determine when a vehicle is a total loss, how those settlement amounts are calculated, and what you should know throughout the process.
Total Loss and Insurance
If your vehicle is determined to be a total loss, your own insurance company may make a settlement offer if your policy provides coverage for the damage, or the at-fault party's insurance company may make a settlement offer if that insurer accepts liability. In either case, if your vehicle is determined to be a total loss, the insurance carrier will make a settlement offer reflecting the
actual cash value (ACV) of the vehicle immediately prior to the loss. You will be responsible for payment of your deductible.
A total loss means that the cost to repair the vehicle is 75 percent or greater than the fair market value of the vehicle immediately prior to the loss. Your insurance company is permitted to add additional costs such as the cost of a rental vehicle and potential hidden damage to the cost to repair your vehicle when calculating the 75 percent value.
Your insurance company generally has 10 days to offer a cash settlement to you. The insurance company must include all applicable taxes and registration fees in the cash settlement offer. The offer from the insurance company must be an amount that reflects the retail value for a “substantially similar motor vehicle” using a nationally recognized valuation manual or computerized data bank, or a quotation for a substantially similar motor vehicle from a qualified dealer at a location reasonably convenient to the claimant.
A substantially similar motor vehicle means a vehicle that is:
- The same make and model as the damaged motor vehicle;
- The same year as or a more recent year than the damaged motor vehicle;
- Contains at least the same major options as the damaged motor vehicle;
- In a condition substantially similar to or better than the condition of the damaged motor vehicle immediately before the damage occurred; and,
- Within the greater of 4000 miles or 10 percent of the mileage on the damaged motor vehicle at the time that the damage occurred unless the vehicle is limited in production, specialty in nature, or older than 10 model years at the time of total loss.
You may request the following in writing from the insurance company:
- Settlement offer
- Explanation of the method used to arrive at the offer
- Detailed explanation of the calculation of the motor vehicle’s total loss value, including the calculation of any value added to the motor vehicle by options
- A list of all the deductions that will be made from the value of the motor vehicle
- A copy of the inspection guidelines relied on to determine the condition of the vehicle at the time of the loss
The insurance company is required by law to respond within seven business days of your request.
Settlement Offer
If you think your car is worth more than what the insurance company offered, you can negotiate with your insurance company. It's important to know that you must provide supporting documentation for your counteroffer. You can do this by getting quotes from car dealers or viewing prices and ads online for similar vehicles.
Vehicles that are determined by the insurance company to be a total loss must be labeled as "salvage vehicles." If you decide to keep the "salvage vehicle," your settlement offer will be reduced by the vehicle's salvage value. If you choose to retain a damaged vehicle that has been declared “salvage” the insurance company will request the following:
- You must send your original title to the insurer before it will send you a settlement check.
- The insurance company will notify the MVA that the vehicle has been declared salvage and the owner has retained possession of the vehicle.
- A salvage certificate will be issued from the MVA.
Understanding the total loss process can help you make informed decisions after an accident. If you have additional questions or need to file a complaint, please contact the Maryland Insurance Administration or call us at 1-800-492-6116.
