A car is considered totaled when the cost to repair the car is greater than the car’s value or the car is unfixable. After a vehicle is damaged, the insurance company will compare the cost of repairs to the value of the car in order to determine whether it is a “total loss,” according to state law. The insurer may then reimburse the vehicle’s “actual cash value,” which is what the car was worth prior to being damaged.
Key Things to Know About Totaled Cars
- Insurance adjusters are the ones who determine whether a car is a total loss.
- Totaled cars can be covered by comprehensive, collision, or property damage liability insurance, depending on the situation.
- If your totaled car is leased or still has an outstanding loan balance, your insurer will first reimburse your lender or leaseholder.
- You may have the option to keep a totaled car, but it’s likely not worth it.
When Does an Insurance Company Total a Car?
An insurance company will total a car when the cost to repair it is more than what the car was worth immediately before the damage occurred. An insurer might also declare a car to be a total loss if it cannot be repaired safely or repaired at all.
If you’re involved in a serious accident, there’s a good chance your car has been totaled, but an insurance adjuster will make the final determination. If the adjuster thinks the car is worth less than the cost to repair it, or if he or she thinks the car cannot be safely repaired, the insurer will notify you that the car has been totaled.
It’s not always possible to assess all the damage until the repairs have begun, so insurers will often total a car with apparent damage that falls well below 100% of the car’s value. Sometimes, state law dictates the amount of damage necessary to total a car, and this threshold can be as low as 50% of its value.
What Happens When Your Car is Totaled?
If your car is totaled by an accident that you caused or something other than an accident, then you need to file a claim with your collision or comprehensive insurance, respectively. Your insurer will then reimburse you for the car’s value, minus your deductible, up to your policy’s limits.
If your car is leased or financed, then it’s possible that your outstanding balance is more than what your car was worth. In that case, gap insurance will pay for the difference between what you owe and your car’s value. If you don’t have gap insurance, you’ll be stuck paying for a car that you can no longer drive.
For damage caused by an accident that wasn’t your fault, you need to file a property damage claim with the other driver’s insurance company. Their property damage liability insurance will then reimburse you for the car’s value, up to the limits of the policy. If their liability limits are not enough to cover the full value of the car, then you can either sue them for the remainder or file a claim with your own uninsured/underinsured motorist insurance.
How Much Is a Totaled Car Insurance Payout?
The insurance company will reimburse you for the actual cash value (ACV) of your totaled car. The ACV is how much a car was worth immediately prior to being damaged, taking into consideration factors such as age, make, model, and condition. But even after your insurer determines a replacement value for your car, you don’t have to accept their valuation.
Compare their estimate to car value websites like the NADA Guides and Kelley Blue Book. Peruse local advertisements, too, and check with nearby car dealers for similar used vehicles. Also, make sure the valuation considers the car’s mileage and all of its optional features.
If you think the insurer is undervaluing your car, then it’s OK to push back. And if you and the insurance company can’t agree, you can often ask for an independent appraisal.
Once you and the insurer agree on a value, you will be paid that amount minus any deductible. In some states, the payout will also include the taxes and fees necessary to purchase a replacement car. In addition, some insurance policies offer optional “new car replacement” or “better car replacement” coverage that can pay you even more. Read your insurance policy documents to understand what your coverage provides.
If Your Car is Totaled and You Still Owe on the Loan or Lease…
If you’re leasing your car, the insurer will pay the leasing company first. If you have an auto loan, your insurer will first pay off the loan before paying you any money. If your car is worth more than you owe, you will be paid the balance.
However, if you owe more than your car is worth, you still owe your lender the difference. A gap insurance policy, if you have one, can protect you from this risk. Otherwise, you’re on the hook for the balance of the loan.
Can You Keep Your Car If It’s Totaled?
In many states you are permitted to keep your car and pay for the repairs yourself. In this case, the insurer will deduct the car’s salvage value – what they would have gotten selling your car to a junkyard – from what they pay you.
Be realistic, though. You may think that your car needs only minor repairs to be roadworthy, but even a minor accident can make your car unsafe to drive – or unsafe in the case of a future accident. It’s not worth risking your safety or the safety of your passengers.
There also may be a lot of red tape involved in getting your car back on the road. Your car will probably be issued a “branded title,” “salvage title” or “salvage certificate” until repairs are completed and inspected. You may have to pay substantial fees to get the car inspected and titled so that you can drive it again. Your local DMV can give you details about the rules and costs associated with getting a salvaged car back on the road.
Finally, the total loss will be part of the car’s vehicle history report, and you may have a special title that indicates the car has been rebuilt. A totaled car can be difficult to sell later on, as a result. It can also be difficult to get insurance on a car that has been salvaged and rebuilt.
What to Do When Your Car is Totaled
1. File an Insurance Claim
Total loss claims can take a long time to process, so you should contact your insurance company or the at-fault driver’s insurer as soon as possible.
2. Tow the Vehicle to an Approved Body Shop
You’re not required take your car to a specific body shop, but using a mechanic that has already been approved by your insurer is the most efficient way to go. The body shop will give the insurance adjustor a full assessment of the car’s condition and the cost of repairs. Based on that information, the adjustor will decide whether to declare the car a total loss.
3. Gather Your Documents
You will need to provide the insurance company with your car’s title and sales receipt in order to be reimbursed for your car’s value. If you can’t find the title, you can request a copy from the DMV. If your car is leased or financed, then the lender or lessor needs to provide the title.
4. Research Your Car’s Value
To ensure that you’re getting a fair reimbursement, you should try to find out what your car was worth prior to being totaled. The best way to do this is by researching the value of similar vehicles in your area using online resources like NADA Guides and Kelley Blue Book.
5. Check the Status of Your Loan
If your car is financed, you should find out how much you owe on the lease or loan. Once you have a settlement from the insurance company, the insurer will put the money toward paying off what’s left of your lease or loan. You will then receive any remaining amount.
6. Start Shopping for a New Car
Once you know how much money you are going to receive from your insurance company, you can start looking for a new car. In several states, including California and Florida, insurers are required to pay for the sales tax on your new vehicle as a part of the final settlement. But keep in mind that you usually have to request reimbursement within 30 days of purchasing the new car.
Ask the Experts
To gain more insight about totaled car, WalletHub posed the following questions to a panel of experts. Click on the experts below to view their bios and answers.
1. Should drivers ever consider keeping a totaled car?
2. How can drivers get the most from their insurance companies after their car is totaled?
3. What is the most important thing to do after your car is totaled?
4. When do you recommend getting extra insurance to protect against the possibility of a totaled car?