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Total warfare: What to do when your auto insurer totals your car

What happens when a traffic accident devastates your car? It's not a scenario most drivers want to think about. Still, it's one you should consider before it happens, especially if you're shopping around for an auto insurance company.

When you "total" your car, you cause substantial damage, and your insurance company has the right to decide that your car isn't worth fixing. The decision to total is a function of the car's worth. Minor damage to a 15-year-old Buick might result in totaling the car, while major damage to a brand-new Saab might not. Auto insurance claims adjusters usually determine a car's actual cash value by using their company's proprietary database of prices.

Some companies total vehicles at 51 percent of its actual worth; some total at 80 percent. The insurance company will pay you the car's actual cash value, minus any deductible on your coverage. Then the car goes to a salvage yard, where it's auctioned off to the highest bidder and usually chopped up for parts. The insurance company keeps whatever money it got for the car in salvage.

Where are they taking my baby?

But what if you don't agree with your insurance company's assessment of the damages? What if you really love your car and you don't want them to take it away? Do you have any recourse?

Yes and no. When you buy an auto policy, you sign a contract with your insurance company. You can't force your insurer to pay out more than your car is worth: That's part of the contract. But on the other hand, you're supposed to be "made whole" by your insurer, meaning you should be put back into relatively the same spot that you were before the accident.

If your car is a total loss but you want to have it repaired anyway, you should be able to retain it. Your insurer still has to pay you the car's actual cash value, minus the deductible and minus what the company would have gotten for it at the salvage yard. You should let your claims adjuster know up front that you want to keep the car. You're then going to have to pay for the repairs yourself.

Make sure you think your decision through. If you decide to give up your car but then you change your mind, you're going to have a hard time buying it back at auction. If your car is a newer model and its parts would fetch a lot on the auction block, your auto insurance company may decide to send it to salvage despite your protests.

License to buy

In most states, your car is gone for good once it goes to auction. Regulations vary, but in many places you won't even be able to attend the auction without a special license for auto salvagers or auto dealers. It's good to call the auction house beforehand to see if you will need a license in order to bid on your car.

If you do get your car back from your insurer, you'll be left with a badly damaged car and perhaps only a fraction of the money needed to repair it. If the car is really beyond repair, you'll be left with a carcass of a car and a check that's not quite enough to buy you a new one.

If the car is repairable, make sure you have all the necessary work done. Insurers can refuse to completely cover a car that's been totaled if it hasn't passed a department of motor vehicle (DMV) inspection - often a necessary step in getting your car back on the road. As long as it passes DMV inspection, however, you should have no problem buying liability insurance. Physical damage coverage - comprehensive and collision insurance - is a different story. Some insurers won't sell you physical damage coverage if you're driving a previously totaled car. (For more about the inspection process, turn to Inside the insurance auto-auction pipeline.)

The price is wrong

People who complain about their total loss settlements generally don't want their old, crashed cars back. Instead, they complain that their insurer didn't give them enough money to buy a similar car. However, your insurance company's estimate of what a comparable car will cost may differ from the realities of the marketplace. There are many variables that determine the value of your car, such as miles driven, pre-accident condition, special equipment installed, and local market conditions for your vehicle.

If you disagree with the insurance company's assessment of your vehicle, you can hire an independent appraiser at your own expense to perform an inspection of your vehicle (contact a local body shop or garage to find one). Be sure to get a detailed inspection put in writing. Then present that information to your insurance company.

If the insurance company refuses to give you more money, you have two options: arbitration and litigation. Arbitration is a process in which you and the insurance company present your facts to a third-party arbiter. Arbitration can be binding (which means the arbiter's decision is final) or non-binding (meaning you can still take the insurer to court if you are unsatisfied).

But before you decide to hire an independent appraiser, or even pursue the matter in court, you have to weigh whether the fight to get more money for your vehicle is worth the expense.