How do insurance companies decide to total vehicles in Tucson Arizona?

Tucson Auto Body repair Estimates

If you have been in a car accident and the damage is more severe than the typical fender bender our customers are usually worried that the car will be totaled. This is a reasonable fear to have as accidents come unplanned and most people are not prepared to have to buy a new or replacement vehicle.

The Rules are changing for Arizona Insurers
If you would have asked me this question even a year ago the answer would have been very concrete. Insurance companies total a vehicle when the cost to replace the vehicle is within 80% of the cost to repair the vehicle. The latter 20% is a buffer zone to account for supplements that usually come with a repair. So if your car would have a replacement value of say $10,000, the threshold for the repair would be at the $8,000 mark. If the repair was $7,500 or below, the car would get fixed, if the estimate was $8,500 or more, the car would be totaled and you would get a check for $10,000 to go buy a replacement car.

Now we are starting to encounter situations where insurers are totaling vehicles when the damages are as low as 40 to 50 percent of the vehicle’s pre-loss value. This is a really bad situation for car owners who are hoping to keep the vehicle or for those who owe more than the insurance company says it is worth, usually people with fairly new cars as the depreciation hits harder in the beginning of the loan. How and why do insurers do this, and what rights do consumers have when it comes to keeping their vehicle?

This isn’t a situation specific to Arizona Insurers, this is happening nationwide. But why is it happening, and what can you as the car owner do about it?

Vehicle salvage at an all time high
Due to the complexity of new cars on the market, their parts are extremely valuable. When your car is totaled and the Insurance company buys it from you, they are then getting a lot of money back in selling it to salvage yards.

Another technique Insurers use is to settle the claim below state thresholds for a “total loss” titles and then sell them at auction to auto rebuilders who are willing to pay higher prices for repairable vehicles with clean titles.

In certain popular models, even overseas buyers will pay higher prices prices for salvage.

In some cases, its more cost effective to write you a check.

Like any business, insurance companies are looking to increase profit. Minimizing overhead costs and reducing financial risks are an easy way to achieve higher profits. Sometimes the decision whether to total a vehicle has nothing to do with how repairable it is, rather, if an insurance company is able to settle with the vehicle owner at a lower than fair market value for their car, and then resells the car to a salvage company at close to the pay out value, the insurance company can save time, reduce administrative costs, rental car usage, and eliminates the possibility of hidden damage supplement costs, or diminished value claims.

Arizona Total Loss Laws
Here in Arizona, total loss is calculate based on a Total Loss Formula (TLF) which is:

Cost of Repair + Salvage Value > Actual Cash Value

As an example if you had a 2010 Ford F150 with an actual Cash value of $13,000, and the salvage value was $3,000, if the damages were under $10,000 then the truck could be considered for a repair. However there are exceptions to this formula that factor in age and mileage, and as we said earlier, salvage prices are increasing.

The Car owner
Most customers do not know how to navigate the nuances of an auto repair claim and they often look to the insurer or their agent for help in completing the process quickly. In most states, insurers are given the privilege to do business with the understanding that they have a duty to do so in an equitable (“just and fair”) manner and most states have guidelines the insurers have to follow. Most insurance professionals do adhere to this code, but they also have a company to protect.

What most car owners do not know is that they have the right to dispute and negotiate the offer from the insurance company.

Here is where we come in, your Tucson Auto body repair shop. As you can imagine we deal with insurance companies every single day. They are our business partners and in some instances, even friends. So when your claims adjuster is evaluating your car, we can help negotiate on your behalf and ensure that you are getting a fair deal even if we do not end up being able to repair your car.
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