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How Do Car Insurance Companies Calculate Total Loss Value in Illinois?

Posted on April 4, 2023

After a vehicle accident that causes property damage occurs, the incident typically turns into an insurance claim relatively quickly. It may be the case that an insurance carrier determines that a vehicle is a “total loss.” Here, we want to examine what it means for a vehicle to be a total loss as well as the process that insurance companies take to calculate the total loss value above the vehicle.

The Process for Calculating Total Loss Value After a Crash

Information from The National Association of Insurance Commissioners (NAIC) says that the fair market value of a vehicle should be the amount at which the vehicle can be bought and sold in its current condition (this term can also be used to discuss the value of a vehicle before the crash occurred). Basically, the best way to describe fair market value is by examining what a typical buyer would pay for the vehicle in its current condition. There are various common methods of obtaining the value of a vehicle, including Kelley Blue Book or NADA.

When a car is involved in an accident, the insurance carriers will do one of two things – they’ll either pay for the repairs of the vehicle, or they will declare the vehicle a total loss and write a check for the fair market value of the vehicle. The fair market value will almost never be the value of the vehicle at the time it was purchased due to depreciation, wear and tear, and mileage. Other factors can affect the fair market value of a vehicle, including the geographic location, whether or not the vehicle has been any accidents before, the availability of similar vehicles on the market, the desirability of the vehicle, and the method used to sell the vehicle.

Under the total loss formula in Illinois, the cutoff for whether to repair the vehicle or replace the vehicle is the fair market value of the vehicle prior to the incident minus the scrap value of the vehicle. If the cost to repair the vehicle exceeds this figure, then the vehicle will be considered a total loss.

For example, let us suppose all the following factors apply to a particular vehicle in question:

  • Pre-cash value of $15,000
  • Cost of repairs equals $6,000
  • Salvage value of the vehicle equals $10,000

If we take the pre-cash value of the vehicle and subtract out the cost of repairs and the salvage value, we arrive at -$1,000, which means the vehicle is a total loss. If the vehicle is less than a total loss, the insurance carrier will have to pay for the repairs.

Working With an Attorney

If you or somebody you care about has sustained property damage as a result of the negligent actions of another driver in Illinois, we encourage you to reach out to an attorney as soon as possible. An attorney can help adequately calculate the value of your vehicle to ensure that the insurance carrier treats you fairly every step of the way.

When you have an attorney by your side, you will have an advocate ready to handle all communication with the insurance carriers and stand up for your rights.