What is the insurance status of a car that has been "totaled" and the owner decides to keep?

Question

We have a 2004 van, it had never been in an accident, never needed more than regular maintenance service. All bells & whistles, excellent leather interior (no kids). It was bumped in the back, broken tail light, broken plastic outer bumper (not the steel under bumper) A 1/2" deep 5" long dent in the fender. Insurance estimate $ 4,000, blue book value $ 3,000 = totaled. I put a few pieces of duct tape on it and no one notices anything (almost) and it drives perfectly. If we take the $ 3,000, keep the car and replace tail light and plastic bumper, what happens if we are in another accident? We are fully insured.

jwh20 · Accepted Answer

Keep in mind that an insurance policy is a contract between you and the insurance company.  In return for your premiums, they agree to do certain things.

One of those things is to compensate you for damages which appears to be applicable in this case.  So you have sustained a loss and the company is obligated to make you "whole" according to the terms of the policy.

They have a limit on how much they will pay for damages in relation to their estimated value of the vehicle which also appears to be applicable in this case.  They are saying that the damage of $4000 exceeds the $3000 value of the vehicle so they are "totaling" it which means that in return for you giving them the vehicle, they will pay you $3000.

This arrangement often works well for newer vehicles but for older vehicles you may find that you cannot even come close to replacing what you had for the $3000 payout.

So what are your options?

In some cases you can request to "buy back" the totaled vehicle for some price that you and they agree upon.  In this case it's a separate transaction from the insurance claim payout and you will almost certainly receive a "salvage" title.  This can be a problem depending on your local laws to getting it back on the road or selling it.
You can refuse the total claim and request they simply payout the maximum damage claim for repair.  That may be less than the $3000 but you keep the vehicle, you get some money, and you don't go through the trouble of a salvage title.  In some cases this is a better deal for you and if the vehicle can be fixed for less than the settlement amount, you have some money left.

What you do really depends on the value of the vehicle to you, what you think you can fix it for, and what your plans are for it in the future.  A well maintained easily repaired older vehicle may serve you well and it may be worth keeping.

I would generally avoid the salvage title route unless you are well versed in what it takes to get the vehicle back on the road legally.

DavidSupportsMonica · Answer

The owner's insurance policy may have an exclusion for vehicles which bear a "salvage" title.
If such an exclusion appears in the  policy terms and conditions, then despite the OP's statement that the car is "fully insured"...it isn't, and the insurance company can decline payment for damages or injury.

What is the insurance status of a car that has been "totaled" and the owner decides to keep?

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