Over the past few years, we have seen an increase in vehicles that are deemed a 'total loss' by an insurance carrier when a claim is filed. There are a number of reasons for this. Read on to learn about why this is happening - and what you can do about it.
A total loss is declared by an insurance carrier when a claim is filed and it costs more to fix a vehicle than the vehicle is worth. In this instance, an insurance carrier will determine a fair market value for the vehicle and issue a check (usually to the insured, sometimes to a lienholder) for that amount. The insured (that's you) then uses that check to pay off the loan or lease and/or buy a new vehicle. This is a process called indemnification or making whole.
But why does it happen? It used to be that vehicles were made of strong steel and other metals. There was a frame and a body and when those elements were involved in a crash, a body shop could hammer out some dents, weld some other pieces together (or get new pieces), throw on a coat of paint and the vehicle was like new. Today's vehicles are much more complex. They are made from more complex materials and have wires, cords, and computers throughout the vehicle. What used to just be a funder-bender can now end up as a total loss when you factor in the computers that need to be replaced, the hairline fractures somewhere else in the frame caused by the impact, and the cost of getting replacement parts. While yesterday's vehicles were easier and less expensive to fix, today's vehicles are safer and more fuel efficient. It's hard to argue that safety isn't worth it, but from an insurance standpoint, this is just another reason why insurance costs go up and up.
So what can you do about it? There are a few things you can do: First, when looking for a new vehicle, check with your insurance agent about the cost of insurance. If something costs less to insure, that means the actuaries at insurance companies have deemed that vehicle to be less of a risk to insure - both in the frequency of claims and the cost of claims. Second, while it's tempting to purchase a vehicle with the latest bells and whistles, consider if those are critically important. Sometimes a base model will work just fine and cost a lot less to insure, and thus less to repair. Finally, be vigilant on the road and drive safe. Distracted driving is the #1 cause of accidents today. If you can't avoid the cost of a repair, you may be able to avoid an accident and needing a repair at all.
If you've got questions about the cost to insure your next vehicle or how the claims process works, call us at (248) 531-8300. We are more than happy to help and answer all of your questions!
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