What is a Total Loss Vehicle? [How Insurance Works if Your Car is Totaled]

If you’re in an accident and your car is severely damaged, it may be declared a total loss.

Male claims adjuster looking at damaged car
Updated May 13, 2024
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Whether you drive to work every day or rarely get behind the wheel, there’s a good chance you’ll eventually be in an auto accident. In 2020, there were more than 5.2 million car crashes reported to police. If you’re in an accident and your car is damaged, your insurer may declare it a total loss.

What is a total-loss vehicle? It’s when the repairs to fix your car would exceed its value or state value thresholds. If that happens, the insurer will send you a check for its current value. But the determined value of your vehicle may not be enough to pay off your existing car loan or buy another car.

Here’s what you should know about total losses after an accident and what you can do to protect yourself.

In this article

What is a total loss?

If you’re in a car accident and you have collision coverage, your insurance company may declare your vehicle a total loss. That means the cost of the repairs to your vehicle would be more expensive than the cash value of the vehicle or would be over state total loss thresholds. In some cases, a car may be totaled if the insurance company decides it cannot be safely repaired.

If your car is a total loss vehicle, the insurer will send you a check for the actual cash value at the time of the accident. You can use the check to buy another car or for other expenses.

How do you know if your car is totaled?

When you're involved in a car accident, you need to contact your auto insurance company right away to start the claims process. Your insurance company will send a claims adjuster to assess the damage and estimate the cost of repairs. If the cost of the repairs is too high, the insurance company will label it as a total loss.

How expensive repairs need to be varies by state law. In some, such as Colorado, a car is totaled if the repairs exceed the car’s current cash value. In others, a vehicle is a total loss if the physical damage is over a certain threshold of the car’s value. For example, a car is a total loss in Arkansas if the repairs would cost 70% of the car’s value. In Florida, the threshold is 80%.

There is no way for drivers to know if their car is a total loss without a professional mechanical evaluation. But a common misconception is that a car is automatically a totaled loss if the airbags are deployed in the accident.

Replacing airbags is expensive — it typically costs $1,000 to $5,000 to replace and professionally install them after an accident — so they can add to the repair costs and push the vehicle over the threshold for total losses. However, the airbags going off isn’t enough on its own to cause a car to be totaled.

How much is your totaled car worth?

Once the insurance adjuster has declared your car a total loss, the insurance company will issue you a check based on the vehicle’s actual cash value, minus your deductible. Insurers usually work with third-party vendors to determine current cash value; the vendor will use factors like the car’s age, mileage, and condition before the accident to set a price.

If you disagree with the car insurance company’s valuation, there may be room for negotiation. You can ask the insurer for what sources they used to determine the value of the car. If you can’t come to an agreement, some states allow you to hire your own appraiser to evaluate the vehicle.

If you financed your vehicle, you may have a car loan. In some cases, the actual cash value of the totaled vehicle may not be enough to pay the auto loan in full. If you don’t have gap insurance, you may have to cover the cost between the loan amount and the totaled vehicle’s value. 

Gap insurance is an optional form of coverage that pays for the difference between a vehicle’s current value and the total amount you owe on a car loan after an accident.

Who pays for the total loss car?

If your car is totaled in an accident, how the claim is handled depends on who was at fault. When you are the at-fault driver, you only have coverage for your vehicle if you purchased collision insurance. If you only have liability coverage, which is usually required by the state, you’ll have to cover the cost of replacing your vehicle on your own.

If the other driver was responsible for the accident, you can work with the other party’s insurance company for reimbursement.

Some drivers carry collision insurance and comprehensive insurance. If that’s the case for you and the other party was at fault, you can use your collision coverage to file a car insurance claim and get reimbursed. However, your insurance company will then work with the other driver’s insurance and seek repayment. If that occurs, you may be reimbursed for your policy deductible.

What should you do after your car is totaled?

After your car is totaled, work with your insurance company to find out when you can expect reimbursement and what steps you need to complete to get a rental car. When you file a claim and your car is a total loss, the insurance company may increase your rates, so be prepared for a higher insurance premium.

In most cases, you cannot keep your totaled car. Once you settle a total loss, the car belongs to the insurer and they can decide to sell it for parts or at auction. Some companies will allow you to keep it, but it’s at the insurance company’s discretion. If you do keep your car, the insurance company will deduct the salvage value from the total loss settlement.


What value does insurance use to total a car?

If your car is a total loss, the insurer will determine its worth based on several factors, including its age, the vehicle’s condition, mileage at the time of the accident and the sales price of comparable vehicles in your area.

The value you get won’t necessarily match up with the price listed on a site like Kelley Blue Book. When determining the value of a totaled vehicle, companies often use third-party vendors that aggregate vehicle data to calculate the current cash value.

Does a total loss affect credit?

Although being in an accident where your car is declared a total loss can cause your insurance premiums to increase, the incident doesn’t affect your credit.

The only way a totaled car would impact your credit score is if the reimbursement from your insurance company for the total loss vehicle wasn’t enough to cover your outstanding car loan and you failed to make the required payments. If you miss payments on your loan, even if you no longer have the car and it’s been totaled, the lender will report the late payments to the credit bureaus. Missed payments can cause significant damage to your credit.

Will an insurance company pay for a rental car after a total loss? If so, for how long?

Whether an insurance company will pay for you to rent a car after an accident depends on how your car insurance policy works. Car insurance doesn’t automatically pay for a rental. Rental reimbursement coverage is an optional benefit that you may be able to add to your policy for an added fee, but if you were trying to keep your premiums as low as possible, you may have skipped it. If you aren’t sure, review your policy to ensure you have the appropriate insurance coverage.

Is it worth buying a total loss car?

In some cases, insurance companies may allow policyholders to keep a car after it’s been declared a total loss. The car owner can opt to make the repairs on the vehicle or sell it, but the seller must notify prospective buyers that the car has been totaled in the past, and the car will save a salvage title.

A car that was a totaled loss can be appealing because of its relatively low price — salvaged cars are significantly cheaper — but there are risks. The car may be more difficult to resell or trade in later on. Many insurance companies refuse to insure salvage cars, so getting coverage can be hard to do. You also need to consider the repairs; even if the car looks great, it may not be safe to drive.

Bottom line

What is a total loss vehicle? A total loss is when it would cost more to repair your vehicle than the actual cash value of your car, or the repairs would be over your state’s threshold. If your car is a total loss, the insurance company will give you a check for its cash value, minus the amount of your deductible.

Keep in mind that not all drivers carry collision and comprehensive coverage, so you may not get reimbursed for a total loss. If it would be difficult to replace your car yourself, contact your insurance company to get full coverage on your vehicle.

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Author Details

Kat Tretina

Kat Tretina is a personal finance expert focusing on practical financial matters, including student loans, debt repayment, side hustles, insurance, and healthcare. Drawing from her personal experience, she aims to simplify complex financial topics and provide individuals with the information they need to make informed decisions.