How do insurance companies decide to total a car in Texas? Knowing whether the insurance company will be totaling your car after an accident in Texas is helpful for many reasons. First, it gives you the opportunity to get an early jump start on researching comparable vehicles to present to the insurance company in order to increase your offer on the actual cash value of the car. Second, it will give you more time to shop for a replacement vehicle while the insurance company performs their investigation and estimate of the damages. Third, it may help to avoid accruing additional costs such as storage fees that the insurance company may refuse to pay if you failed to properly mitigate your damages by leaving your car at a storage facility for an unreasonable amount of time.
Texas Law on When a Car is Totaled
Texas law mandates how insurance companies determine when to total a vehicle and provides a formula, as indicated in the Texas Transportation Code. According to Texas Transportation Code Section 501.091(15), a salvage or “totaled” vehicle has damage to or is missing a major component part to the extent that the cost of repairs, including parts and labor other than the cost of materials and labor for repainting the motor vehicle and excluding sales tax on the total cost of repairs, exceeds the actual cash value of the motor vehicle immediately before the damage. In other words, the Texas total loss formula to determine whether a damaged vehicle must be a total loss is:
Cost of Repair + Salvage Value > Actual Cash Value
If the total cost of repairs plus the salvage value is greater than the actual cash value (ACV) or market value of car, then the insurance company must total the car. For example, if your 2008 Honda Accord has an actual cash value of $5,000 and the cost to repair it is $4,500 and the salvage value is $1,000, then your car would be totaled.
$4,500 + $1,000 > $5,000
Please keep in mind that insurance companies may decide to total a vehicle when the damages are less than the actual cash value. This law just provides a damage threshold in which a vehicle must be totaled.
For tips on how to handle your own car accident property damage case in Texas, click here.