Slide 1. Introduction.
The class discusses what a car accident is, the different types, how to act after an accident, and the implications for fleet management.
Slide 2. What is a total car loss accident.
- Total car loss accident.
Talking about traffic accidents means referring to any unexpected mishap on the road. Knowing what is considered a car accident is essential to understanding how insurance works in these situations. It is not just about collisions, but can also include theft, fire, or even scratches to your car while it is parked.
For the insurance company to intervene, the incident must be covered by the policy. In general, it is important to notify the insurance company as soon as possible to begin the process. Although we would prefer never to have to do so, it is important to know how this process is regulated and what steps to follow.
The following is a description of the case in Spain, which is the same or similar in any country.
- What is considered an accident in insurance terms.
In the insurance industry, an accident is any unexpected event that causes damage to the insured car. This incident triggers the coverage contracted in the insurance policy, allowing the vehicle to be repaired or the owner to be compensated.
Not all incidents are considered accidents: specific conditions must be met. That is why it is so important to be familiar with the policy and review the clauses that may influence the company's decision.
- Types of accidents according to the degree of damage.
Car accidents are mainly classified into two types: total and partial.
- Total accident.
The term “total accident” applies when the damage to a vehicle exceeds a certain percentage of its market value. Although this percentage varies depending on the insurer, it usually ranges between 75% and 100% of the car's market or replacement value. In these cases, the insurance company does not cover the repairs, but offers the owner compensation equivalent to the estimated value of the vehicle before the accident.
The market value of a car is what it was worth before the accident. To calculate this, it is necessary to know the characteristics of the vehicle, the amount of compensation, and its age.
The most common reasons why a car may be declared a total loss are:
Ø Serious accidents.
Where the cost of repair is too high.
Ø Vehicle theft.
If it is not found or is recovered with serious damage.
Ø Accidents involving fire or flooding.
That significantly affect the structure and mechanical systems of the car.
- Partial loss.
Applies when the damage is repairable and the vehicle can still be used. This includes minor dents and scratches. This distinction is key for the insurer to decide whether to compensate or repair.
- Classification by cause of the accident.
Not all accidents happen in the same way. Among the most common are rear-end collisions, accidents at roundabouts, and door slams in parking lots. However, there are also others caused by natural or extraordinary events.
If a storm floods the streets or hail damages your car, this is considered an extraordinary event. In these cases, the Insurance Compensation Consortium assumes the functions that would normally correspond to your insurer. For more common situations, your company will take care of everything.
- What to do immediately after an accident.
- The first thing to do is stay calm. Make sure no one is injured and that there is no risk of further collisions or fire.
- Next, you must notify your insurance company. You have seven days to report the accident. Give a detailed account of everything that happened without omitting any information, as any contradictions could delay the process.
- Depending on your policy, they will tell you if you need to contact other parties involved, submit any additional documents, or if they have already been able to determine liability.
- After receiving the report, the insurance company will open a file, gather all the information, review your policy, and send an expert to assess the damage.
- A decision will then be made as to whether compensation or repair is appropriate, or whether the claim is not covered. If information is missing or there are doubts, the process may be delayed, so it is advisable to provide all the information from the outset.
- Compensation: how much does the insurance company pay?.
The compensation you receive will depend on the type of insurance and the value of the car at the time of the accident. Third-party insurance will only cover certain damages, while comprehensive insurance offers broader coverage.
If the car is declared a total loss, you may receive the market value or the replacement value, as stipulated. In the event of partial damage, the insurance company will cover the repair costs. Always read your policy carefully, as there are clauses that may change this general logic.
- What options does the owner have after a total loss claim?.
If you receive a total loss claim, you have several options:
- Accept the compensation.
This is the most common option. In this case, the insurance company pays the value of the vehicle and takes care of permanently deregistering it. However, if the owner wishes to keep the car, the company will deduct the residual value of the damaged vehicle from the compensation.
- Keep the damaged car.
This is possible, but the owner must pay for the repairs themselves. In some cases, damaged cars can be sold for parts or repaired to be driven again, provided they pass a new MOT.
Even if the insurance company declares your car a total loss, you can keep it, for example, if you want to use its parts to sell them on the second-hand market. In that case, the insurer will give you a lower compensation than the initial one, as it will deduct the value of the parts that can be used when you keep the car from the market value prior to the accident.
You should pay special attention to the terms and conditions of your policy contract, as it will specify what to do in the event of an accident. There is also the possibility, provided that this is stated in the policy contract, of transferring these parts to the insurer so that they can sell them on your behalf.
- Another option is to repair it yourself.
This option is viable if the cost of the repair is affordable and the legal requirements for putting it back on the road are met. However, in many cases, insurance companies increase the price of policies for cars that have previously been declared a total loss.
- You can drive a car that has been declared a total loss until it has been repaired and passes the MOT test.
You cannot drive a car that has been declared a total loss until it has been repaired and passed the MOT test. If it does not pass the MOT test, it must be permanently deregistered and cannot be used on public roads.
- Impact on insurance and resale value.
If you decide to keep the car and repair it, the insurance company may not offer you the same conditions as before the accident. Some companies apply restrictions or reject it outright. In addition, if you decide to sell it in the future, its market value will be lower than that of a car with no accident history.
Keeping a car that has been declared a total loss is a decision that must be made with care. It is essential to evaluate the repair costs, legal implications, and future possibility of insuring it. In most cases, the most convenient option is to accept the compensation and purchase another vehicle. If you decide to keep it, be sure to seek professional advice to ensure that the repair is safe and complies with current regulations.
- More and more cars are being declared a total loss by insurance companies after an accident.
More and more cars are being declared a total loss after an accident, even when the apparent damage does not seem particularly serious.
One of the key factors behind this phenomenon is the age of the vehicles. In fact, more than 72% of total loss assessments correspond to cars that are seven years old or older. As the residual value of these vehicles decreases, any major repairs can quickly exceed the economic threshold that insurers consider viable.
In practice, this means that a moderate collision involving an older car can be more expensive to repair than compensating the owner for the total value of the vehicle at that time, thus accelerating its withdrawal from the market.
Added to this factor is the increasing technological complexity of modern cars. Advanced driver assistance systems (ADAS), sensors, radars, cameras, and electronic components are increasingly integrated into elements such as bumpers, windshields, and rearview mirrors.
What used to be solved by replacing a part now requires electronic diagnostics, calibrations, and, in many cases, much more expensive components.
The economic impact is not limited to vehicles declared a total loss. Even for cars that are repaired, costs have increased.
In addition, medical expenses associated with accidents are also rising, due to more expensive treatments and claims for injuries that occur earlier in the compensation process.
- Implications for fleet management.
The main consequence if the vehicle is declared a total loss is that it cannot be used to provide the service and is decommissioned, and we will have to purchase a new vehicle.
The following measures are recommended.
- Total loss in the insurance policy.
The insurance policy must include when a vehicle is considered a total or partial loss, when the vehicle is repaired, the valuation of the vehicle, when we can keep the vehicle, etc.
- Driver training.
A protocol must be established for action to be taken when a total loss occurs. Above all, the fleet manager or the person in charge of insurance management must be notified so that they can communicate with and manage the insurer.
- Proof of total loss.
Evidence of the total loss must be obtained, such as the police report, photos, location, date, people involved, etc. The more evidence, the better.
- Use of the vehicle for spare parts.
In certain highly specialized vehicles such as those used in public works, street cleaning, mining, ports, airports, etc., it is sometimes difficult to find spare parts for various reasons, such as the vehicle being very old, no longer being sold, the vehicle manufacturer having disappeared, etc.
In this case, if we have a total loss, it is advisable to keep the vehicle and use it for spare parts for other vehicles in the fleet.
- Repairing the vehicle.
When replacing the vehicle is simple, as in the case of passenger cars, vans, trucks, etc., it is recommended not to repair the vehicle and to purchase a new one.
When a vehicle is highly specialized, is no longer sold, or is very difficult to replace, it could be repaired, provided that spare parts are available.
- Electric vehicle.
The high cost of repairing an electric car battery after an accident means that many insurance companies prefer to declare the vehicle a total loss. For this reason, most of these vehicles end up being scrapped, regardless of their mileage.
- Comply with the established protocol.
You must comply with the established protocol when you have a total loss, especially reporting it within the set time.
Slide 3. Thank you for your time.
The class has developed what a car accident is, the different types, how to act after an accident, and the implications for fleet management, see you soon.
