Car Totaled? Here’s What That Means

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 cost of repairs required to fix your car exceeds its actual cash value or the value threshold set by your state.

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 — it may be the right move to have insurance coverage for that possibility.

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 a total loss.

How expensive repairs need to be for the insurer to total your vehicle 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 Alabama if the repairs would cost 75% of the car's value. In Florida, the threshold is 80%.

Replacing airbags is expensive — it typically costs $1,000 to $6,000 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 my 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.

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 to do when 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.

FAQs

Bottom line

If you’ve been in an accident, having your car totaled by your insurance company can feel like adding insult to injury. Repairs can get expensive, and cars depreciate in value faster than almost any other physical asset, so if the accident was bad enough, a total loss may be unavoidable.

To set yourself up for the best possible outcome, find the best car insurance for your needs and consider getting gap coverage if you’re leasing or financing your vehicle with a loan.