What to do with a totalled car

Getting into a car accident is scary. There’s also a lot to consider, from reporting the car accident to when a car is considered totalled. Then there’s the question of what to do with a totalled car. In this article, we explain what a totalled car is and how it may be covered by car insurance.

Totalled car defined

A totalled car, which is also sometimes referred to as a “write-off,” is when the cost of repairing the damage to the vehicle following a collision is more than the value of the vehicle. Your insurance provider will likely be the one to determine whether your car has been totalled by calculating the vehicle write off value. If it is deemed a write-off, you will have a few options to consider. Before we dive into these, let’s take a look at how car insurance covers totalled cars.

Car insurance and totalled cars in Canada

Since each car insurance policy is different, you will need to consult the terms and conditions of your unique policy to find out if and how you are covered for a totalled car. That said, the following types of coverage most commonly apply to situations involving a totalled car:

Third party liability coverage

Liability insurance is a type of mandatory coverage for all drivers in Canada. Each province has its own minimum coverage requirement. For example, in Ontario and Alberta, it is $200,000. Third party liability coverage may cover the cost of repairing or replacing your totalled car if you were not at fault for the accident.

Comprehensive coverage

Comprehensive coverage is optional for most Canadian drivers, though it can be extremely beneficial, especially if your car is totalled due to a peril like fire, wind, water, falling objects, or vandalism. Keep in mind that comprehensive coverage pertains to non-collision-related damage, so your totalled car would have had to have been caused by something other than an accident.

Uninsured automobile coverage

Uninsured motorist coverage is required in many Canadian provinces. It can cover the cost of vehicle repairs, among other expenses, if you get into an accident with a driver who is uninsured, underinsured, or who is unidentified because they fled the scene of the accident.

Collision coverage

Collision insurance is a type of optional insurance coverage in Canada unless you lease or finance your vehicle, that is designed to cover extensive damage, such as a totalled car, that arises from a major accident. With collision coverage, if you get into a serious accident with another vehicle, an animal, or a grounded object, such as a lamppost, your insurance provider will help pay to repair or replace the vehicle. To ensure you receive a sufficient payout, make sure to choose a coverage limit that reflects the value of your vehicle.

Loss of use coverage

Loss of use coverage will not pay for your totalled car to be repaired or replaced. However, it is still relevant as it may pay for you to get around while your totalled car is being repaired or replaced. For instance, if it’s going to take a week for you to buy a new vehicle, loss of use coverage can pay for you to obtain a rental car, use ride share services like Uber, or take public transportation during this time. With loss of use coverage, you can be compensated up to the daily or total limit.

Determining a totalled car

Before you can file a claim for your totalled car, the insurance company will first need to determine that it is, in fact, a write-off. As mentioned above, a car is generally considered totalled if the value of your vehicle is less than the cost of repairing it. The value of a vehicle is typically determined by an appraiser. A professional appraiser will calculate the market value and replacement cost of your vehicle by considering factors like the year, make, model, features, kilometres, condition, pre-accident damage (if applicable), and type of engine of your vehicle. They will do an in-person inspection, as well as independent research, to calculate the value of the car, as well as the estimated cost of repairs. Once the in-person inspection is complete, the appraiser will compare it to other vehicles of the same model in your neighbourhood to ascertain the estimated selling price.

What to do if your car is a write-off

If an appraiser, and by extension your insurance company, deems your car a write-off, you have a few options. First, if you believe that your vehicle is worth more than the appraiser says, you can negotiate the payout amount with your insurance company. However, for the negotiation to go in your favour, you should be prepared to present ample research that proves your vehicle is worth more than the appraiser’s findings. To do this, you should look at the selling price of other similar models of cars in your area and highlight any upgrades, modifications, or luxury features that it has.

Second, if your vehicle was deemed “salvage,” meaning there is no structural damage to the vehicle, you might have the option of keeping the vehicle in the settlement agreement. That said, if you wish to drive it again, you will need to have it repaired and those expenses will be entirely out of pocket. Lastly, if your vehicle was deemed “irreparable,” by the insurance company, then you are not legally allowed to fix it or drive it again. That said, you might be able to sell it for parts for a bit of money. As you can see, there are a few options available to you if your car is totalled other than simply agreeing to the payout. However, in some cases, the wisest option is accepting the payout offered to you by your insurance company and putting it towards the purchase of a new car.

Totalled car payouts

If your car is totalled and you choose to accept the payout offered by your insurance company, there are a few things you should know. First, the payout amount you receive will depend on the value of your car and the type of coverage included in your policy. While some people may have added new car replacement coverage, also known as replacement cost, to their policies, most don’t given the high monthly cost of doing so. As such, what most people have as part of their car insurance plans is actual cash value coverage.

Actual cash value vs. replacement cost

Actual cash value and replacement cost are two types of auto insurance coverage, each of which offers a unique way of valuing your vehicle. Comparatively, actual cash value is the amount of money needed to replace or repair your car, adjusted to account for depreciation, whereas replacement cost is the cost of replacing your car with a brand-new one. When your car insurance plan features replacement cost coverage, policyholders typically receive a larger payout because depreciation isn’t considered - and given how much cars tend to depreciate with time, this can make a significant difference.

Oppositely, when an insurance company calculates the actual cash value of a car, they are considering the accumulated depreciation according to the age, mileage, pre-existing damage, current condition, and other factors of the car. Therefore, the payout amount is likely to be far less, which means that you will likely need to contribute a considerable amount of money out of pocket when buying a new car.

Gap insurance: when you owe more than what your car is worth

It is worth noting that if your vehicle is financed or leased and you still owe money on it, your leasing or financing company will be paid first before you receive any of your payout. If there is a positive balance after your creditors have been paid, you will receive the rest of the money to cover the cost of replacing your vehicle. In contrast, if there is a negative balance remaining, you will still be responsible for paying the money back to your creditor. Unless you have gap insurance, you will likely be forced to pay this money out of pocket.

Gap insurance is a type of optional insurance coverage that is incredibly beneficial to those who drive leased or financed vehicles. As the name suggests, gap coverage is designed to fill the gap between the value of your vehicle and how much you owe on it. It specifically exists to help ease the financial burden of a situation where one’s leased or financed car is totalled. Gap insurance must be added to your In other words, you cannot add it to your policy retroactively once you’ve gotten into an accident. Some leasing companies require borrowers to purchase gap insurance.

It is worth considering gap insurance if your vehicle is leased, you made little to no down payment on your car, your vehicle has a reputation for losing value quickly, your car loan term is over five years or has a high interest rate, you drive more than 15,000 kilometres annually, your car was used to secure a personal loan, or if you rolled over the remaining balance from a previous car loan into a new loan for an even newer car. In any of these scenarios, gap insurance can come in handy.

Filing an insurance claim for a totalled car

If your car is totalled, you will need to file a claim with your insurance provider. This process can be daunting, so BrokerLink breaks it down below. If you have further questions, don’t hesitate to reach out and speak with a licensed insurance professional at any time.

Exchange insurance information with the other driver

Assuming you got into an accident with another driver, the first thing you should do after ensuring everyone is safe is exchange insurance information. Ask for the other driver’s insurance and vehicle registration information, including the name of their insurance company and their policy number, as well as their driver’s licence number. You should also take note or a photo of their vehicle’s licence plate number, make, and model. Now is also a great time to gather other evidence to support your claim, like eyewitness statements and photos and videos of the scene.

Report the accident to your insurance company

The next step is to contact your insurance company to report the collision. This is a must and should be done promptly following the accident. Be prepared to answer a few questions about the accident and the claims process. Your insurance provider will have specific answers about what forms you need to fill out, what type of coverage to claim, and how long the claims process will take.

Call for a tow if you cannot drive your car

If your car is undriveable, call a tow truck to pick it up. Depending on your coverage, this may be covered by your insurance provider, such as if you have roadside assistance. Alternatively, if you are a member of the Canadian Automobile Association (CAA), this service may also be free of charge. For most drivers, having your vehicle towed will cost you money out of pocket, so be prepared for that extra fee.

Organize your documents and submit your claim

The final step to filing a claim if your car is totalled is to gather all the necessary documents, complete all forms, and formally submit your claim. Some of the information you will likely need to include are the bill of sale, proof of ownership, receipts for any necessary repairs, as well as your car loan or leasing documents if your vehicle is leased or financed.

Reporting a totalled car to the police

Depending on where you live in Canada and the circumstances of the accident, you may be required to report it to the local police. Even the most common car accidents may require reporting. While it’s generally good practice to call the police following a car accident, especially a serious one that results in a totalled car, you might be legally required to do so if your accident meets any of the following criteria:

• Someone died in the accident
• Someone was seriously injured and required medical attention or hospitalization
• The other driver involved was unlicensed
• The other vehicle was not registered
• It was a hit and run accident meaning the other driver fled the scene
• You were unable to collect the licence, vehicle registration, and insurance information of the other driver
• You suspect that the other driver may have been under the influence of drugs or alcohol
• Your insurance provider requires you to report the accident to the police in order to submit an insurance claim

In Ontario specifically, you are legally required to report a collision in the following circumstances:

• If the damage caused by the accident exceeds $2,000 between both vehicles combined
• If someone is injured in the accident, whether the injuries sustained are major or minor
• If the accident involved a government vehicle
• If the accident involved a driver who is uninsured or underinsured
• If the accident involved a criminal act, such as impaired driving or driving under the influence of drugs or alcohol
• If the accident involved a pedestrian
• If the accident resulted in damage to private or municipal property

When you call the police, and they write a report, it will feature all kinds of information, much of which you might be able to use to your advantage when filing your insurance claim. Using Ontario as an example, you can expect your police accident report to consist of the following:

The report number: All police accident reports feature a unique reference number.

The date and location of the accident: The report will clearly state the date and location of the collision.

The accident details: Photos of any damage or injuries that arose from the collision will be outlined in the police report. Such details may include the precise location of the damage or injuries, as well as the type of collision.

Driver information: The police report will include the driver’s licence numbers, insurance company names, insurance policies, and contact information of all motorists involved in the collision.

Vehicle information: The police report will list details about the make, model, and year of all vehicles involved in the collision.

Witness statements: The full statements from any eyewitnesses or passengers will be included in the report.

Driver statement: A statement outlining the causes and events that lead to the collision from the driver’s perspective will be added.

Miscellaneous information: Any other information that the police decide is relevant to the collision, like hazardous road conditions or weather, will also be listed.

Ultimately, if you get into a car accident and need help navigating the reporting or claims filing process, do not hesitate to reach out to BrokerLink. One of our licensed insurance advisors would be happy to explain each process in detail, as well as provide you with pertinent information relating to the province or municipality where the accident occurred.

Contact BrokerLink for more information on totalled cars and car insurance

If you have more questions about totalled cars, get in touch with BrokerLink today. We have an entire team of auto insurance specialists ready to answer your questions. Whether you want clarification on how a car is determined to be a write-off, how to file an insurance claim for a totalled car, what types of coverage will cover you for a totalled car, or the differences between actual cash value coverage and replacement cost coverage, BrokerLink is your go-to.

We aim to be the top resource for all Canadians who need help navigating the world of car insurance. Brokerlink also offers complimentary quotes to all prospective customers. Reach out today to receive a free quote in minutes. All BrokerLink quotes are accurate, reliable, and obligation-free and can be obtained in-person, over the phone, or on our website using our online quote tool.

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