Totaled Car Guide

A car is considered totaled when the cost of repairing it plus its salvage value adds up to more than the vehicle was worth immediately before the damage occurred. A car may also be considered totaled if the cost of repairs exceeds a certain percentage of the vehicle's value, as dictated by state law.

For instance, New York uses a total loss threshold (TLT) of 75%, meaning that a car must be totaled if its repair costs are 75% or more of its actual cash value. Total loss thresholds like the one used in New York leave a cushion for higher-than-estimated repair costs, given that damage is often more extensive than it initially appears. If the state doesn't have a total loss threshold law, insurers will generally use the standard totaled car formula, which includes the salvage value.

How to Determine If a Car Is Totaled

• Most States: A car is totaled if the cost of repairs plus the salvage value is greater than the actual cash value.

• Total Loss Threshold States: A car is totaled if the cost of repairs is greater than a certain percentage of the vehicle's actual cash value. Total loss thresholds are often 70%-80%, depending on the state.

Many states also allow the owner of the vehicle to declare the car a total loss at will. However, that is only for title purposes – you cannot call your vehicle a total loss for the sake of an insurance payout.

Factors That Affect Whether a Car Is Totaled

Insurance companies take a car's repair costs, salvage value and actual cash value into account when deciding if it should be totaled, along with applicable state law.

Repair Costs: A vehicle's repair costs vary depending on extent of the damage as well as the car's make, model, and year. For instance, luxury cars and cars with specialty parts, like hybrids, are usually the most expensive to repair.

Salvage Value: A car's salvage value is the amount that the vehicle is worth in its damaged state, such as for parts and scrap metal.

Actual Cash Value: A car's actual cash value (ACV) is the amount the car would be worth if it hadn't sustained the damage in question. Insurers determine ACV by comparing the car to similar vehicles in the area, accounting for factors such as mileage, condition, and extra parts. ACV is also important to drivers because insurers will pay them the car's ACV if the vehicle is totaled in a covered scenario.

Finally, you can always ask your insurer if you don't understand how they decided your car was totaled. And if you have evidence to support your claim, you can also argue that your car was worth more than the insurer estimated. For more information, check out WalletHub's 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.

How to Fight an Insurance Company Over a Totaled Car's Value

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 agree to your counteroffer, 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 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.

Fighting an Insurance Company's Decision to Total a Car

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 fight your insurer if they decide your car is totaled. Unfortunately, you can typically only fight your insurer about your vehicle's value.

However, if your insurance company declares your car a total loss in violation of your state's laws, it is important to contact your state's insurance regulator for help. They can investigate the situation and see if the insurer is acting in bad faith. 

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

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 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.

Getting Gap Insurance

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.

Things that make a car totaled include costly damage, theft, or not being repairable after an accident. A car is usually considered totaled if the cost to repair it after an incident approaches or exceeds the vehicle's actual cash value. A car could be totaled after an accident with another car, or by non-accident-related incidents like natural disasters or vandalism.

For your convenience, we'll summarize the scenarios below, followed by a quick overview of what happens when a car is totaled.

Here's What Can Make a Car Totaled:

• Damage that would cost 70% to 80% of the value of the car to repair, depending on the state.
• Damage that would cost more to repair than the vehicle is worth.
• Damage that can't be repaired.
• Being stolen and not recovered.
• Being stolen and recovered with extreme damage.

Here's What Happens if a Car is Totaled:

You will need collision insurance or comprehensive coverage to have a totaled car covered after things like at-fault accidents, theft or natural disasters. In those cases, your insurance company will pay out the actual cash value of the vehicle, minus any applicable deductible.

If your car is totaled because of another driver, their liability insurance is responsible for paying for your totaled vehicle.

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

Cars that are totaled are sold by insurance companies to salvage yards or rebuilders, who will repurpose a vehicle's parts or attempt to rebuild and resell it. If the damage to a totaled car is so severe that it can't be rebuilt or used for parts, then it may be sent to a scrap yard, which will recycle the metal. 

It's estimated that car recycling is a $25 billion industry in the United States, with more than 12 million totaled vehicles being recycled annually. In the U.S. and Canada alone, recycled vehicles produce enough steel to make about 13 million new cars each year.

Keeping a Totaled Car

It is possible to keep your vehicle after it's totaled, though it's usually not recommended. If you decide to keep your vehicle, you need to notify your insurance company. When they send your claim settlement, the salvage value will be subtracted from the final amount since they won't be able to sell the vehicle.

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

It is not worth keeping a totaled car in most cases, since the cost of having it repaired typically outweighs any potential benefits. Once a car is totaled, the state will give it a salvage title, meaning that it cannot be driven legally unless the owner has it repaired, inspected, and reinsured. The process of repairing a salvaged vehicle to make it roadworthy again can be expensive, and depending on the extent of the damage, it may not even be possible.

Even if you do rebuild your totaled car, you may struggle to insure it, since not every insurance company covers rebuilt titles. Additionally, the total loss will be added to the car's vehicle history report, which will likely make it difficult to sell later on.

If you still decide that you want to keep your totaled car, you need to notify your insurance company, and they will subtract the car's salvage value from their settlement. Bear in mind that if your car is leased or financed, your lender or lessor will have the final say on whether or not you can keep the vehicle.  

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