What Happens if Your Car Is Totaled?

When Is a Car Considered Totaled?

Insurance companies determine a car to be totaled when the cost of repairs would exceed the value or when the car can't safely be fixed. Generally, auto insurance policies don't cover the cost of fixing a totaled car. So, if repairs would cost $10,000 but the vehicle has a market value of only $7,500, the insurer probably would call it a total loss.

An insurer may also declare your car a total loss if the repair bill would be higher than a fixed percentage of the car's value.

Once a car is totaled, your insurer might pay you the actual cash value of your car, based on the language in your insurance policy.

What Is Actual Cash Value?

Actual cash value, also known as fair market value, refers to how much money someone would have paid for the car on the open market before it was totaled. Actual cash value differs from something known as replacement cost value. Replacement cost value refers to what it would cost to buy a new car similar to the totaled car. Not all auto insurers provide a replacement-cost-value option.

It's worth noting that your car insurance premium will go up if your coverage uses replacement cost value instead of actual cash value.

Learn more: Replacement Cost vs. Actual Cash Value

What Determines Your Car's Actual Cash Value?

The insurer typically calculates the actual cash value of a totaled car by reviewing the following information about the vehicle:

• Make and model
• Age
• Mileage
• Condition
• Resale value of the parts and metal (known as the salvage value)
• Possibility of unseen damage (such as alignment problems)
• How popular your car is among local buyers

Insurers normally turn to Kelley Blue Book or similar services to determine what's known as a car's book value.

Does Insurance Cover a Totaled Car?

If an insurer totals your car, it's generally covered by two portions of your policy: comprehensive coverage and collision coverage. A lender or leasing company normally requires both kinds of coverage. If you've paid off the car, you don't need to buy comprehensive or collision coverage. In other words, that coverage is optional.

But without coverage other than the liability insurance that's mandated in nearly every state, you may have to pay out of pocket to replace your totaled car (particularly if the crash was your fault).

Comprehensive insurance covers damage or disasters not related to a collision. Collision insurance comes into play when your car is damaged in a crash with another car, an object or property.

5 Reasons Insurance Companies Deny Claims for Totaled Cars

In some cases, an insurer might refuse to pay a claim for a totaled car. Here are five potential scenarios:

1. You don't have the right coverage, such as comprehensive or collision.
2. You owe past-due premium payments.
3. You were driving under the influence.
4. You waited too long to tell your insurance company about the damage.
5. You submitted a fraudulent claim.

Be aware: Each insurance company relies on different criteria for deciding whether a car is a total loss. However, if one insurer totals your car, another insurer is likely to do the same.

3 Tips for Filing a Claim on a Totaled Car

Here are three keys to remember about filing an insurance claim for a totaled car:

1. You must pay the deductible ($500, for example) before the insurance company writes a claim check.
2. If you believe your car's value is higher than the insurance company's offer, consider negotiating a bigger payout.
3. After the insurer has processed a claim, the company normally takes ownership of the totaled car, which might be sold for parts or scrap metal. If you'd like to keep your totaled car (and it's permitted in your state), the insurer will subtract the salvage value from your claim check.

Learn more: How to File an Auto Insurance Claim

How Much Does Insurance Pay for Totaled Cars?

Most states cap the payout for a totaled car within a typical range of 70% to 80% of the car's value.

Example: If your car is valued at $15,000, the claim payment might be $10,500 to $12,000. Don't forget that the insurer will subtract the deductible from the payout.

As mentioned above, an insurer won't cover repairs for a totaled car if the repair bill would exceed the car's value.

4 Times When Your Auto Insurer Won't Total Your Car

Unfortunately, not every car that looks like it should be totaled will be declared a total loss. Aside from the repair bill being higher than the car's value, here are three reasons your car might not be totaled:

1. If the repair bill for your car would be hefty but still fall below the payout threshold, your insurer might opt for repairs instead of a payout.
2. Even though your car bears major dents, scratches or paint damage, your insurer might refuse to declare your car a total loss.
3. An older, less valuable car with minor damage might hit the total loss cap, but a newer, more valuable car with serious damage might not reach the level of a total loss.
4. If your car can be driven despite the damage, your insurer might pay for repairs rather than totaling the vehicle.

How an Insurer Uses the Total Loss Formula to Total a Car

If your state doesn't impose a percentage threshold on a payout for a totaled car, your insurer would use what's called a total loss formula to determine whether a car should be totaled. The formula involves subtracting the car's value, as determined by a junkyard, from its actual cash value.

Example: Let's say your car's actual cash value is $12,000. Your insurer checks with a junkyard to find out what it would pay for your totaled car. In this case, the junkyard is willing to pay $3,000. Subtracting $3,000 from $12,000, your insurer comes up with a sum of $9,000. If the car repair estimate is over $9,000, the insurer declares your car a total loss.

Learn more: How Does an Insurance Company Determine Car Value?

Do You Still Have to Make Loan Payments on a Totaled Car?

Even if you can't drive the car, experts suggest keeping up with loan or lease payments until the insurance company sends the claim payout to the lender.

What if you still owe money after the lender receives the claim payout? If you have what's known as gap insurance, you likely won't need to worry. Otherwise, you're responsible for bridging the gap between the claim payout and the loan or lease balance.

Example: If your insurance company covered the totaled car's actual cash value of $20,000 but you still owe $25,000, you're responsible for making up the $5,000 difference.

In this scenario, optional gap insurance that you couple with standard coverage could fill the gap between the $20,000 claim payout and the $25,000 loan or lease balance, so you wouldn't need to pay the $5,000 difference out of your policy.

Keep in mind that gap insurance takes effect only when your car is covered by optional comprehensive and collision coverage. Gap insurance generally costs about 5% of your car insurance premium.

What Happens When Your Car Is Totaled But Still Drivable?

Even though a car has been declared a total loss, it still might be safe to drive it. However, you should take these factors into consideration before getting behind the wheel of a totaled car:

• Is the damage cosmetic or structural? If the exterior was damaged, such as dents or broken lights, the car still might be safe to drive. But if the damage was structural, such as the engine being mechanically harmed, the car may be unsafe to drive.
• Do you need to get a safety inspection? It's recommended that you hire a certified mechanic to conduct a safety inspection before driving a car that's been totaled. In fact, some states may require a safety inspection before a totaled car can hit the road.
• Do you need a rebuilt title or salvage title? In some states, a totaled car can be fixed so it can qualify for what's known as a rebuilt title or salvage title. This title shows the car is legally ready for the road. However, a car with one of these titles might run into insurance challenges and might drop in value.
• How will your totaled car be insured? Some insurers might restrict coverage or charge higher premiums for a totaled car that's been repaired. For example, you may be unable to purchase comprehensive or collision coverage for a car with a rebuilt title or salvage title.
• How will having a rebuilt title or salvage title affect future claims? If you get into an accident while driving a previously totaled car, it might be tougher for a claim to be approved since it can be difficult to determine whether the damage is old or new.

How Can a Totaled Car Affect Your Credit Scores?

A car accident—even one that caused a car to be totaled—doesn't directly affect your credit. Credit scores are calculated using data from your credit reports, which don't contain information about your driving history or insurance claims history.

To ensure your credit stays healthy, work with your insurer and your lender to verify that any loan for your totaled car is paid off and closed in good standing. Your obligation to make car payments doesn't disappear until the loan balance is reduced to $0, whether that's because your insurer issued a payout to the lender or because you paid the remaining balance after the lender took the payout into account.

Although an accident won't hurt your credit scores, it might affect your auto insurance premiums, even after a car has been totaled. How can you escape this scenario? Some insurers offer accident forgiveness, which isn't available in every state. Accident forgiveness prevents your insurance rates from going up after filing a claim for your first at-fault accident.

An auto insurance policy might include accident forgiveness at no cost, or an insurer might offer accident forgiveness as an optional add-on that you can purchase.

How to File an Insurance Claim for a Totaled Car

Here are nine steps to take for handling the claim process for a totaled car:

1. Submit the Claim

You typically can do this by calling your insurance company or agent, or by filling out a claim form on the insurer's website or mobile app.

2. File a Police Report

By phone, online or at a station, file a police report about the accident. In some cases, a police report is required only if the damage exceeds a certain dollar amount. This report may help if insurance or legal questions arise about the accident. If the accident involves major damage, serious injuries or a death, call the police as soon as possible.

3. Gather Evidence

Take photos or videos of damage to your car and any other cars involved in the accident. This evidence can help support your claim or help you defend a crash-related lawsuit. Also, keep a record of license plate numbers for other cars involved in the accident.

4. Exchange Information

At the accident scene, trade information with drivers and witnesses, such as names, addresses and phone numbers. In addition, obtain the names and phone numbers of the other drivers' insurance companies, along with their policy numbers. To save time, take photos or screenshots of the other drivers' insurance cards.

5. Keep Records

Save all emails sent to or received from the insurance adjuster and insurance company. Also, make note of the dates, times and details of calls with the insurance adjuster or insurance company. In addition, locate maintenance records for the car and hang onto your car's registration sticker.

6. Schedule an Inspection

After filing the claim, make an appointment for an insurance adjuster to inspect your car. You don't need to be there when the car is inspected.

7. Reserve a Rental Car

If your policy includes rental car coverage, reserve a rental car to drive if your car is being repaired. An insurer normally allows you to keep the rental car for a reasonable amount of time while it's being fixed and your claim is being reviewed.

8. Weigh the Settlement Offer

The insurance adjuster will notify you once they've determined how much the insurer is willing to pay for your totaled car. You can accept the settlement as is or negotiate a better settlement, perhaps with an attorney's help.

9. Locate the Car Title

For the claim to be finalized, you must provide your car title to the insurance company. This document proves you own the car. If you can't find the title, you'll need to order a copy from your state's department of motor vehicles (DMV).

Frequently Asked Questions

The Total Picture

If your car is totaled, your insurer generally will pay its actual cash value, minus your deductible, based on the car's pre-accident condition and market value. Coverage typically comes from collision or comprehensive insurance. You can negotiate the payout if you disagree with the insurer's valuation. If you still owe money on the car, gap insurance might cover the difference between the payout and the loan or lease balance.

A totaled car won't hurt your credit scores, but it can affect insurance premiums and coverage options. Before or after a wreck, use Experian's free quote comparison tool if you go shopping for car insurance.