Going through a serious car accident is a harrowing experience. When your carrier reviews the insurance claim after the accident, it often sends an insurance adjuster to assess the car’s damage and determine whether it’s worth repairing. If it isn’t, the insurer will say your vehicle is totaled.
Our auto guide delves into what adjusters look for when determining whether a vehicle is totaled, how much insurance pays for totaled vehicles, details on total loss laws, and some of the top auto insurance companies to consider for coverage.
Key Takeaways
- Insurance adjusters call a vehicle totaled after judging that the car’s needed repairs cost more than its pre-accident cash value.
- Comprehensive insurance coverage, collision coverage, and property damage coverage protect your financial investment in your car based on how it got damaged.
- If you’re making loan or lease payments for your car, the insurance company pays your lender before it pays you.
What Defines a Car as Totaled?
Insurance companies consider your car totaled when it has extensive damage and is either not cost-effective to repair or unsafe to drive. This usually means a claims adjuster finds that the vehicle’s damage and cost of repairs exceed the car’s cash value before the accident happened. Adjusters can also total a vehicle if they decide it’s no longer safe to operate.
During the adjustment process, insurance companies must abide by the total loss limits each state implements.
Total Loss Laws
A total loss refers to when damage done to a vehicle exceeds the car’s cash value. States have different ways of reaching this conclusion, including a simple percentage threshold and the total loss formula.
With the simple percentage threshold, if the damage of the car exceeds a certain percentage (normally 70% to 75%), insurance providers can declare the vehicle totaled.
The total loss formula compares the vehicle’s cash value minus its salvage value against the cost of repairing the vehicle. For example, if the vehicle’s value is $8,000 and it has a salvage value of $500 but the repairs cost more than $10,000, state laws allow insurance carriers to declare the car a total loss.
What Happens When Your Car Is Totaled?
You’ll file a claim based on the type of coverage the accident falls under, such as collision insurance for crashes or comprehensive coverage for acts of vandalism. Next, your insurance company cuts you a check for the value of your car minus any deductibles that might apply.
Suppose your vehicle’s fair market value is $7,000, but your insurance policy has a deductible of $1,000. In that case, your carrier would pay you $6,000 for the covered claim.
Totaled Car Coverage
Which specific insurance coverage your carrier uses to pay for a totaled car depends on the cause of the car accident. Here’s a breakdown:
- For at-fault accidents: You’ll use your collision insurance
- Climate events: Comprehensive insurance fixes damages from acts of nature like flood, fire, tornadoes, hail, and falling objects from wind
- Vandalism: Comprehensive coverage
- Accidents resulting from impact with large animals: Comprehensive insurance
- Accidents where you’re found not at fault: Liability insurance of the driver found at fault
- Accidents involving underinsured or uninsured motorists: Uninsured/underinsured motorist coverage
How Much Does Insurance Pay for a Totaled Car?
Many factors come into play when an insurance company determines how much money to assign to the actual cash value of your vehicle. Insurers often use a proprietary methodology when calculating a payoff.
How Do Insurance Companies Determine the Value of a Totaled Car?
Factors that insurance companies look at to determine value include its:
- Year, make, and model
- Mileage
- Accident history
- Depreciation
- Wear and tear relative to age and use
- Value in your local market
- Cosmetic issues (if any) that happened before the accident
Insurance carriers set the car’s value using these and other factors, and they send out payouts based on that value minus applicable deductibles. However, if you financed your car or have a lease for it, your insurance carrier pays the lender/leasing company first. If you owe a balance after the payout and have gap insurance, it’ll pay the difference. If you don’t, you’ll pay out of pocket for the rest.
Keep in mind that the fair market value of your vehicle won’t equal its replacement costs for a new car because of the natural depreciation of automobiles. If you want an accurate depiction of what your vehicle is worth, use a tool like Kelley Blue Book. Enter your car’s mileage and condition to get the most accurate financial estimate.
If you disagree with your insurance’s payout assessment, you can present a counteroffer. When doing so, make sure to include the reasons why you disagree with the amount and present documentation supporting it, such as:
- An independent appraisal
- Receipts for modifications or repairs that would increase the value of your vehicle
- Prices of similar automobiles in your market
Can You Keep Your Car if It’s Totaled?
Most states let you keep a totaled vehicle and pay for repairs. If you plan to keep the car, you’ll need to notify your insurance carrier, which can return possession of the vehicle to you or send it to your preferred repair shop.
Also, when the insurance company determines the payout, it will subtract your vehicle’s salvage value — the amount your insurance carrier makes when it sells cars to salvage yards. Depending on your state, you’ll more than likely need a salvage title as well. You can have the salvage title removed once you complete any repairs and your vehicle passes a road-ready inspection. This approach has benefits and drawbacks.
Pros and Cons of Keeping a Totaled Car
There are several pros and cons to consider with a totaled car.
What To Do When Your Car Is a Total Loss
When your vehicle is involved in a serious collision, rendering it totaled, here are a few steps to take:
- Contact your insurance company. Insurance companies need time to process total loss claims. The sooner you can reach out to your insurer or the insurance company of the driver who caused the accident, the quicker you could receive a settlement.
- Have your vehicle towed to a repair shop. Find a repair shop your insurance company approves and have it towed there. Often, your carrier will do this for you.
- Provide documentation. You’ll need to have the vehicle’s bill of sale and title to give to your provider. If your vehicle is under financing, have the lender supply the information on your behalf.
- Learn your vehicle’s value. Use Kelley Blue Book or the NADA* to find how much your car was worth before the collision. Knowing this information can help you determine if the settlement the insurance company offers is fair.
- See what you owe. If you financed or leased a vehicle, your lender can supply you with a payoff for the loan. Then, once the insurance company processes the claim and pays off the lender, you’ll receive any remaining balance. If you owe more than the vehicle is worth, you can use gap insurance (if you have it) to pay off the rest.
- Rent a car while shopping. Chances are, you’ll need transportation while shopping for your new vehicle. If you do rent a vehicle, your insurance policy’s collision and liability coverage apply to it, so you don’t have to worry about buying additional insurance with the car rental companies.
- Know your rights. In some states like Florida and California, insurance companies must include the sales tax of your newer vehicle in their payouts.
Totaled Car Guide: The Bottom Line
Totaling a vehicle means it will cost more to repair it than what it’s worth. After a collision, your auto insurance company sends an adjuster to calculate the extent of the damage. Insurance companies also use total loss thresholds your state imposes to determine when to total a vehicle.
If an insurance company totals your car, you can keep it and do the repairs on your own. Doing so could save you money if you have a vehicle with a lower value. However, remember that you’ll need a salvage title, which stays on your vehicle’s history, making it more difficult to insure or sell. You also have the ability to negotiate your total loss settlement by researching what your vehicle’s value was before the accident.
Top Auto Insurance Recommendations
Receiving quotes from multiple car insurance companies gives you insight into which provider offers you the best prices and coverage. Here are two of the best to consider:
State Farm: Best Customer Experience
State Farm offers liability and full coverage options, with additions like ridesharing insurance, rental car reimbursement, emergency roadside assistance, and travel expense coverage, which provides up to $500 for food and lodging if you’re more than 50 miles away from home and your car needs repairs.
The provider also offers ample discounts to students. Students who carry at least a B average receive up to a 25% discount on insurance premiums. If you use State Farm’s telematics program, Drive Safe & Save™, you can save up to 30% on your insurance policy. Overall, State Farm offers customized solutions that can save you money.
Geico: Best for Budget-Conscious Drivers
Geico offers some of the cheapest auto insurance rates for a provider. If you’ve been accident-free for five years, you could save up to 22% off your policy. Federal employees save up to 12%.
Geico is also one of a few providers offering mechanical breakdown insurance. It covers the cost of repairs once your vehicle’s factory warranty expires. Geico also has optional protections like gap insurance and emergency roadside assistance. In short, Geico is a sound pick if you’re looking to save money.
Total-Loss Vehicle FAQs
Here are a few frequently asked questions about total-loss vehicles:
How do you determine the value of a totaled vehicle?
Your insurance adjuster considers your vehicle’s fair market value in its current condition and what the market is like for similar vehicles where you live.What is a salvage title?
A salvage title is a title designated to vehicles where insurance companies declared the damage so extensive they considered it a total loss. As such, it plummets the vehicle’s value. Having a salvage title can also make it difficult to insure the car or resell it until you’ve had repairs made, passed inspection, and received a rebuilt title.- What is the NADA value of a totaled car?
Enter your vehicle’s information on a site like Kelley Blue Book, then select “fair condition.” With a car in fair condition, it ranges from 20% to 40% of the value of your car. With totaled vehicles, your resale value will likely be closer to the 20% range.
Our Methodology
Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best car insurance companies. We collected data on dozens of auto insurance providers to grade the companies on a wide range of ranking factors. The result was an overall rating for each provider, with the insurers that scored the most points topping the list.
Here are the factors our ratings take into account:
- Cost: Auto insurance rate estimates generated by Quadrant Information Services and discount opportunities were both taken into account.
- Coverage: Companies that offer a variety of choices for insurance coverage are more likely to meet consumer needs.
- Reputation and experience: Our research team considered market share, ratings from industry experts, and years in business when giving this score.
- Availability: Auto insurance companies with greater state availability and few eligibility requirements scored highest in this category.
- Customer experience: This score is based on the volume of complaints reported by the NAIC and customer satisfaction ratings reported by J.D. Power. We also considered the responsiveness, friendliness, and helpfulness of each insurance company’s customer service team based on our shopper analysis.
Our credentials:
- 800 hours researched
- 45 companies reviewed
- 8,500+ consumers surveyed
*Data accurate at time of publication.