Totaled Car Guide

When your car is a total loss, it means the car cannot be repaired safely or that repairs would be too expensive compared to the vehicle's value. If your car is declared a total loss due to a covered scenario, the insurance company will pay you the car's actual cash value and will usually sell the vehicle as scrap.

Once you file a claim, the insurance company will determine whether the car is a total loss. Depending on your state's laws, your car may be totaled if the cost of repairs exceeds a certain percentage of the car's value, such as 75%. If your state does not have a specific total loss threshold, your vehicle will be considered a total loss if the cost of repairs plus the salvage value is greater than the car's actual cash value (ACV).

Insurance Payout for a Total Loss Claim

For a car that was totaled by an accident, you will be reimbursed by the other driver's property damage liability insurance if they were at-fault or your own collision insurance if you caused the wreck.

If the damage was caused by something other than an accident, like vandalism or a natural disaster, you can receive a total loss payout from your own comprehensive coverage.

What to Do If Your Car Is a Total Loss

• If you think the insurer undervalued your car, you can present evidence and negotiate.

• You will likely need to send your insurance company your keys, remove your license plates and personal items from the car, and sign over the title.

• If your car was leased or financed and you have gap insurance or loan/lease payoff coverage, file a claim.

For more information, check out WalletHub's complete guide to totaled cars.

You can fight an insurance company over a totaled car's value by sending the insurer a counteroffer along with evidence justifying your car's value. If the insurance company does not raise its offer, you can contact your state's insurance regulator, seek arbitration, or file a lawsuit. However, it's important to remember that insurance companies are only required to pay a car's actual cash value (ACV), not the cost of a replacement car or the original price you paid for the vehicle.

Car insurance companies and state laws determine when a car is declared a total loss, so it is unlikely that you will be able to keep your insurer from totaling the car if they deem it necessary. But you can negotiate with your insurance company if you think the amount they propose the car is worth is less than the car's ACV.  

1. Receive a settlement offer from the insurance company.
2. Gather evidence, including an independent appraisal, the car's sticker details, prices for comparable vehicles, photos of the car before the accident, and receipts for any features you added.
3. Send this evidence and a counteroffer to the insurance company.
4. If the insurance company does not negotiate to your satisfaction, contact your state's insurance regulator to request help.
5. Ask your insurance company for third-party arbitration if necessary.
6. File a lawsuit as a last resort.

It's in the insurance company's interest to prevent a dispute from escalating, so sending a counteroffer directly is the best place to start. Otherwise, the cost of filing a lawsuit is usually not worth the potential rewards, but it depends on your situation.

If your car is totaled and you still owe money on the loan, the insurance company will pay your lender for the car's value, and you will be responsible for any remaining balance if the check is less than the loan amount. If you have gap insurance, it will cover the difference between the car's value and the loan balance. Otherwise, you will need to continue making payments for as long as it takes to bring your loan balance to zero.

If your car is totaled and another driver is at-fault, their liability insurance will pay for the car's value up to their policy limits. If you were at fault, you can file a collision claim. After you receive a settlement from the insurance company, you can determine if you still have a balance left on your loan.

After your lender has gotten the insurance check, you can file a gap insurance claim immediately, assuming you previously purchased coverage and still owe money to your lender. Be sure to follow any instructions in your policy. For instance, some gap insurance policies instruct you to continue making payments to your lender until the claim can be processed.

Unfortunately, your options are limited if you don't have gap insurance and your total loss check does not cover your loan balance. You can try to negotiate with the insurance company to have them increase their estimate of your car's value. However, you will need evidence that your car was worth more than the insurer calculated, and there is no guarantee that you will get more money. Otherwise, you are stuck continuing to make payments, though you could try asking your lender for a payment plan.

If you total your car with no collision insurance, then your insurance will not reimburse you for the value of your vehicle. Collision insurance pays to repair or replace your car after an accident, so without it, you might have to pay out of pocket to replace the car.

If the accident is your fault and you don't have collision insurance, your best option is to sell the car in its current state. You will still be able to recover something through the salvage value, which is the amount of money that a salvage yard will pay for the parts and frame.

On the other hand, if the accident is not your fault, then the at-fault driver's property damage liability insurance will cover the cost of your loss, up to their policy limits. In this case, you will still be reimbursed for the value of your car even if you don't have collision insurance. However, if your car's value exceeds the at-fault driver's liability limits, you will have to file a claim using uninsured/underinsured motorist coverage, file a lawsuit against the driver, or cover the remaining costs yourself.

Collision insurance is not required by any state laws, but you will need to carry it if your car is leased or financed. In general, it's a good idea to carry collision insurance if you can't afford to replace your car and the annual cost of coverage is less than 10% of your vehicle's value.

After a car is totaled, gap insurance covers the balance between what is owed on a driver's loan or lease contract and what is paid to the lender by their collision or comprehensive insurance policy, or another driver's liability insurance. A claim must be filed and verified before a gap insurance provider will make a payment.

How Gap Insurance Works After a Car Is Totaled

1. The policyholder files a claim with their gap insurance provider as soon as the car is declared totaled by their primary insurance provider.
2. The gap insurance provider will verify the car has been totaled due to a covered cause.
3. The driver's primary insurer pays for the actual cash value of the vehicle, minus any applicable deductible.
4. The gap insurance provider pays the difference between the primary insurance payout and what's still owed on the loan/lease contract.

An insurance company will “total” a car when the damage to the vehicle is so severe that the cost to repair it exceeds a certain percentage of the car's actual cash value (ACV), depending on the insurance company's policies and state law.

If you think you might need gap insurance coverage, contact your primary insurance provider, and possibly your lender, to see if gap insurance makes sense for your personal situation. Some gap insurance providers only sell policies to original loan/lease holders within a short period of time after the contract is signed, but others will sell a driver gap insurance as long as there is a need, no matter the age/condition of the vehicle.

Finally, it's important to note that gap insurance is different from loan/lease payoff plans, which customers can purchase at any time if they have an active contract on their car. While gap insurance will pay the entire difference between a financed vehicle's ACV and the contract's balance, and often any deductibles, loan/lease payoff plans only pay a maximum percentage of a car's ACV and don't generally cover deductibles.

An insurance company determines the value of a totaled car by considering factors such as the vehicle's make and model, year, and mileage. A vehicle is considered totaled when the cost of repairs approaches or exceeds the car's actual cash value (ACV), which is what the insurer says the car was worth prior to being damaged. If the insurer declares the vehicle a total loss, they will pay out any insurance claims based on the ACV.

Factors That Affect a Car's Actual Cash Value (ACV)

• Make and model
• Year
• Mileage
• Depreciation
• Accident history
• Mechanical problems
• Wear and tear
• Cosmetic problems
• Local demand for similar vehicles
• Sale prices of comparable vehicles in the area

It's important to keep in mind that the ACV is not the same as the cost of purchasing a replacement vehicle of the same year, make and model. Vehicles begin to depreciate quickly after they're driven off the lot, so even if your car is relatively new, the ACV will probably be significantly lower than what you paid for the vehicle in the first place.

If you think your insurer's ACV calculation is too low, then you should send a counteroffer that includes your justification for why the car was worth more prior to being totaled. This may include an independent appraisal, receipts for any features you added, and prices of comparable vehicles. There are several resources online that you can use to research your car's value, including NADA Guides and Kelley Blue Book.

To learn more, check out WalletHub's guide to totaled cars.

If your car is totaled and you only have liability insurance, you will have to pay to replace the vehicle yourself or file a claim with the other driver's insurance company. Liability coverage alone does not protect your car in any way, just injuries and damage you may cause to others. You need to have collision, comprehensive, or new car replacement coverage if you want your insurance company to pay to replace a totaled car. However, if your vehicle is damaged or totaled in an accident that isn't your fault, you should make a claim on the at-fault party's property damage liability policy to get your car repaired or replaced.

Only Having Liability Insurance Will Not Cover:

• Damage to your vehicle from an accident.
• Damage to your vehicle from fire, hail, flooding, fallen trees/limbs, or animal strikes.
• Injuries you or your passengers incur.
• Theft or vandalism of your vehicle.

On the other hand, collision coverage would help if you cause a run-in with another vehicle or object that totals your car. Comprehensive coverage would apply to damage caused by a fire, storm, or animal encounter, as well as if your car is stolen. Finally, new car replacement coverage would let you recover the full value of a newly purchased vehicle that gets totaled.

Progressive will determine whether a vehicle is a total loss by doing an inspection on the car to assess whether the car can be repaired and whether those repairs will cost more than the car's current value. The car will also have to fulfill the state's criteria for a total loss.  

Some states require Progressive to declare a total loss if the cost to repair a car exceeds a certain percentage threshold of the car's value. That percentage will vary by state. For example, a car with damage equaling 75% of its value is considered totaled in New York, but not in Texas, where the damage has to be equal to 100% of the car's current value. There are 22 states, including Delaware, California and Georgia, that use a total loss formula instead of a percentage threshold. In these states, Progressive will total your car if the cost of repairs plus the car's scrap value equals or exceeds its actual cash value.

If your car is declared a total loss, the title is transferred to Progressive, which will then dispose of the vehicle. Depending on your insurance coverage, Progressive might provide you with a replacement, a claim payout, and sometimes a rental vehicle to use in the meantime. Progressive normally pays out your car's cash value directly to you or to your leasing or financing institution.

Finally, it is worth noting that in recent years, Progressive was involved in class action lawsuits related to the way it values vehicles that are declared a total loss. These complaints alleged that Progressive purposefully undervalued comparable vehicles when evaluating total loss claims. Legal proceedings are still ongoing.

A salvage title is a title issued for a car that an insurance company has declared a total loss, meaning the vehicle is too damaged to be worth repairing. The salvage title will stay in place unless the car is repaired and inspected, after which the driver can get a “rebuilt” title and legally drive the car again. 

After it's damaged, a car could also be designated “non-repairable” or issued a “junk” title. That would mean the damage is so extreme that no one is even allowed to rebuild the car. Instead, the vehicle could be sold for parts or destroyed.

Since a salvaged car is less damaged than a non-repairable car, you're allowed to rebuild it. However, some insurance companies worry that rebuilt cars aren't worth their sticker price. The quality of the repair work matters a lot, and issues could still show up down the road.

That doesn't mean you can't get insurance for a car that previously had a salvage title. It just means that you might have to search a little harder to find insurance, and that you might not be able to get the same coverage you could get for a non-salvaged car.

There are a few major insurers that sell coverage for previously salvaged cars, including Progressive and The Hartford.

No, gap insurance will not cover a totaled car without insurance unless the gap policy specifically allows it, which is highly unlikely. In most cases, you cannot purchase gap insurance or file a gap insurance claim if you don't have collision or comprehensive coverage.

If you purchased gap insurance from a dealer but have allowed your car insurance to lapse, you are likely violating your contract. Gap insurance is really insurance for your loan or lease, not your car, and any reputable lender or lessor will require you to maintain full coverage on a leased or financed vehicle.

For more information, check out WalletHub's guide to gap insurance.