To Repair or Not to Repair!

Totaling or Repairing After Car AccidentOne of the issues someone faces after a car accident is whether or not my car will be repaired or is it totaled.  Some cars have very extensive damage and are repaired.  Others have relatively moderate damage and are totaled.

In your mind, you may think that your vehicle is repairable, especially if it has a lot of sentimental value.  However, the insurance company does not have the same emotional ties to your vehicle. So, how is the decision made to repair or total a car.  How is you car damage valued under Texas law?

The “Total Loss Formula.”

If you have researched this issue, you have seen references to the “total loss formula” or TLF. With the TLF, an insurance company focuses on the cost of repairing your vehicle and its salvage value. Those two figures are added to together.  If the sum equals or is greater than the pre-accident “actual cash value” (ACV) of the vehicle, it is considered totaled. However, if the sum is lower, then the insurer will likely repair your vehicle.

Let’s say your car has an ACV of $10,000.  Let’s also say that your car, in it’s damaged condition, has a salvage value of $2,000.  If it will only cost $3,000 to repair your car, then it will be repaired.  Now, if you car has repair costs of $9,000, then it will be declared a total loss.

Texas is a “Threshold” state.

Texas does not follow the TLF.  Instead, Texas uses the “threshold” method.  The threshold method takes the value of your car and compares it to the cost of repairs.  No consideration is given to the salvage value.  If the repair costs reach a certain percentage of the value of your car (known as the “threshold”), then the car will be totaled. Most states that use the threshold method have a percentage threshold of 75%.  For example, if your car has a value of $10,000, then the cost of repairs would have to exceed $7,500 (75% of $10,000) before it will be considered a total loss.

Threshold percentages vary between 50% and 100% for states that use this method.  In Texas, the threshold is 100%.  That means that the costs of repairs must equal or exceed the full value of your car before it will be considered a total loss.

What if I Disagree with the Insurance Company’s Decision?

If your car can be economically repaired, then it would be practically impossible to convince the insurance adjuster to total your car just because you don’t want to drive a repaired vehicle.  But what if it the numbers are close?  What can you do?

Remember that Texas requires that the repairs equal or exceed the cash value before it is totaled.  Look at the repair estimate and see if everything is being included.  Also, see if they are using salvage or after-market parts.  An insurance company may not require you to repair your vehicle with after-market parts.  Insist on “original equipment manufacturer” (OEM) parts be used.  That can raise the cost of repairs drastically.

If you have been dealing with the other driver’s insurance company the whole time and feel like you are getting nowhere, try making the claim under your own policy.  Your own insurance company may be more accommodating to you on whether to total your car.  If your insurance company decides to total your car, then they will pay the claim and then purse the other insurance company for reimbursement.  If your were charged a deductible, it will be refunded to you if and when your insurance company gets reimbursed.

Another option is to see if the insurance company is over-evaluating the cash value of your car.  Research the value.  If your car is worth less than what they are saying, then you might convince them to total your car.  But, at the same time, you will probably commit yourself to collecting less on the value if the adjuster agrees to total it.  So, be very careful about this option!

Consider Making a Diminished Value Claim.

If all else fails, make a diminished value claim. Everyone knows that a repaired car is not worth a s much as a car that has never been in an accident.  Making this type of claim can help you recovery some of the inherent loss in value that your car now has after the repairs are completed.



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