What Is a Totaled Car?
A totaled car is a car that would cost more to fix than it is worth, or a car that cannot be repaired safely or cost-effectively. For example, if a car is worth $10,000 and the repairs would cost $11,000, the insurance company would declare the car totaled because the repairs cost more than the vehicle's value. 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 totaled.
- Totaled cars can be covered by comprehensive, collision, or property damage liability insurance, depending on the situation.
- If your totaled car has a loan or lease balance, your insurer will first reimburse your lender or lessor.
- You may have the option to keep a totaled car, but it’s unlikely to be 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.
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.
Learn more about when an insurance company totals a car.
What Happens When Your Car is Totaled?
When your car is totaled, you file a claim under the appropriate type of coverage to receive reimbursement for the car’s value, minus any deductibles. The coverage type you’ll use to file the claim depends on the situation in which the car was totaled.
Coverage to Use for a Totaled Car
|Cause of Totaled Car||Coverage to Use|
|Weather-related event or vandalism||Comprehensive|
|Not-at-fault accident||At-fault driver’s liability insurance|
Other coverage options that can help you if your car is totaled are gap insurance and new car replacement. Gap insurance will help to cover any remaining balance owed toward a leased or financed car that gets totaled. New car replacement will replace a totaled vehicle with a comparable new vehicle.
How Much Is a Totaled Car Insurance Payout?
An insurance company will pay the actual cash value (ACV) of a 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.
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 associated with purchasing a replacement car.
Learn more about how much a totaled car payout is.
What Happens When Your Car Is Totaled and You Still Owe Money?
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.
Learn more about what happens if you owe money on a totaled car.
Can You Keep Your Car If It’s Totaled?
You can keep your car if it’s totaled and pay for the repairs yourself in most states. 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.
There may be a lot of red tape involved with getting your car back on the road, though. Your car will probably be issued a “branded title,” “salvage title” or “salvage certificate” until repairs are completed and inspected. The total loss will also be part of the car’s vehicle history report, and totaled cars can be difficult to insure or sell later on.
Learn more about when you can keep a totaled car.
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. Just 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?
5. Can drivers actually save as much as insurance companies advertise when switching companies?
6. Why do car insurance companies spend so much on commercials?
7. Should drivers trust their insurance company?