When you are in a car accident, the damage to your vehicle is evaluated and compared to the overall value of your vehicle. If the cost to repair that damage is higher than the vehicle's value, your car is classified as totaled. The insurance companies reach this determination by looking at several sources.

Actual Cash Value (ACV)

If your car is totaled, you receive the actual cash value for the vehicle in lieu of repairs. This value is considered the amount you could sell the automobile for in your area. The value differs from what is listed in the Kelley Blue Book.

Determining ACV

Insurance companies first determine the value of your car. Given the damage, the value will be lower than you might anticipate. Companies then set the ACV at 51 percent to 80 percent of the value.

Factors

The initial value is based on a number of factors, including the number of miles accumulated, the selling conditions in your area, the condition of the vehicle prior to the accident and any extra equipment or modifications to your vehicle that may affect value.

Disagreement with ACV

If you are dissatisfied with the amount of the ACV offered for your vehicle, most insurance contracts do permit you to hire an appraiser (you pay his services out-of-pocket) to give a different estimate. If your appraiser and the insurance company's appraiser reach an impasse, arbitration is needed to find a middle ground.

Keeping the Vehicle

Once the car is totaled and you receive the money from the insurance, the insurance company owns your vehicle and will auction it off for scrap parts. You can ask to keep the car but your settlement will be lowered to compensate the company for what it would have earned by selling the car in the auction.

Source:

MSN Money Central: What to do if your car is unfairly totaled

Edmund's: Tips for Filing a Claim After a Serious Car Accident

Insurance.com