How Much Does Insurance Payout For A Totaled Car?

Smartchoice Editorial
August 30, 2020

Often, we wonder that the insurance we are getting would worth how much?

The coverage that we are opting for would be available the way we want to and to the extent that we need such coverage. We all understand this one single thing very appropriately that “Life is unpredictable”. That has been especially realized during this 2020 which has been a year that has been surprising us time and again with a new twist at every corner.

Keeping this year and happening in view, it is strongly suggested to be much sure that any decision made in this scenario is well thought and analyzed.
To protect your assets during these unforeseen scenarios is to get insurance for your health, car and other important possessions that would protect you in your bad and unsettling times.

So when sometimes people get into a considerably serious accident, there are chances that your car can get damaged totally resulting in a point of no return. Upon inspection and further assessment, it may be comprehended that there is no point in trying to repair the car given its condition.

If the car is brand new it might still be worth repairing. Usually, the second hand and old cars that have worn out considerably are difficult to repair. Insurance companies term such a car as a “total loss” or a “totalled car”.

So what should you expect from the insurance company to pay you for a totalled car?

Different insurance companies use different procedures to make approximations of payments for a totalled car. However, below mentioned are some important considerations

Estimated Value of the Totaled Car

When you contact your insurance company they send a surveyor’ and claim expert to review the situation of the car and evaluate the damages. If the cost of the vehicle repair goes beyond 60% to 70% of its entire value then the car is characterized as totalled.

Once the surveyor thoroughly checks and categorizes the car as totalled. He then performs an assessment to figure out the value of the car if the accident had not taken place. The insurance provider also employs the services of a third-party appraiser to provide his estimate of the vehicle which has been termed as “totalled”.
This is undertaken to ensure there are no major disagreements and mishandling in the course of value estimation. Based on the approximation resulting from the two evaluations, the insurer gives you an estimate of the totalled car which they are ready to pay off.

Actual Cash Value (ACV)

Actual cash value (ACV) of the car, refers to the amount anyone would be willing to pay for the car had the accident not happened. This ACV value takes into account the cost of depreciation, motorized/mechanical issues and any issues with the exterior body of the vehicle such as dent, dip or scratches.
In the case of classic or vintage cars, the Actual cash value estimation is done in a different way. ACV is considered quite lower than the price at which you bought the car. The insurance company cautiously inspects your car from the miles on the odometer to the most minuscule stains on the car seat even in order to arrive and conclude the ACV.

Replacement Cost

Replacement cost is the estimate of the amount that you will have to pay from your pocket to buy a car similar to one that has been damaged in the accident. This cost shall not be covered from the insurance bracket reason being ACV in most cases is even lesser than the replacement cost. Usually, insurance providers give their offer on the basis of ACV of the vehicle, rather than the actual replacement cost.

Usually, it is that in Pakistan especially the insurer provides money to the equal-cost of the car in the market or on the value the vehicle was insured. It is recommended that whenever you are buying car insurance quote proper value of your car so that when God forbid if need be the money provided by the insurer are enough and the replacement cost from the pocket is minimal.

Other Issues

Usually, what happens is the amount paid by insurance providers for a totalled car is not sufficient to buy an alike car. This could be really upsetting and stressful as well. Not just that, things could be even poorer if you have impaired your brand new vehicle that you bought on loan.

This could mean that you would be paying off the debt that is not benefitting you anymore. If the amount paid out by the insurer is not satisfactory or adequate to pay off your car finance, the difference is considered as a deficiency balance.

Now since you know that the car against which the loan was taken does not exist anymore, the lender becomes even more particular about recovering it. This issue can be resolved by getting gap coverage on your insurance policy. It pays for any deficiency balance remaining.

However, just like replacement cost, gap coverage calls for a higher premium. So if you have bought your car on loan it only then you should get gap coverage so as to protect you in case of any deficiency coverage.

Conclusion

It is essential to know that when you are buying car insurance for your vehicle always check the terms and conditions involve, like when your car gets totalled, how much would the insurer give the compensation, how soon would it be processed, does the company possess the financial strength to pay of claims and if and when the claims are paid out what would be the deductibles etc.

All these terms may sound difficult and you should know that having the right knowledge is important before making the decision regarding your asset. So one thing that is important is to contact someone for unbiased information, Smartchoice.pk can be your one-stop-facilitation for any of insurance needs. Here you can clarify and get the desired information from our car insurance experts and make a decision that fulfils your car insurance needs.

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