What Happens When Your Car Is Totaled?

Posted September 16th, 2015 by Ashley Kane

You were involved in a car accident. Maybe the collision didn’t seem that severe and you were surprised to find out that your vehicle was totaled. Or maybe you knew you were fortunate enough to walk away all right, and that your vehicle was a total loss. Either way, learning that your car is totaled can be a stressful and complicated process.

What Does “Totaled” Mean?

Let’s start with the basics. Here’s what a “totaled” car actually means. Also known as a “total loss”, any vehicle that is beaten up beyond repair, has extensive damages, is dented and unrecognizable, or costs more to fix than its worth constitutes a “totaled vehicle.”  

Your car insurer determines whether or not your car is totaled after an accident by weighing out the cost of repairs to fix the vehicle when you submit a claim. Every auto insurance provider has their own criteria for what they consider a total loss but typically, they first figure out your car’s worth before the collision or event.

Car insurers assess your car’s worth by considering many factors. They’ll weigh out how much your car was worth upon purchase, how old it is currently, and what it’s make, model, and condition is. If you were up to date with your vehicle’s maintenance and took good care of it, it will have more value than a car that was already in need of heavy repairs.

From there, your carrier will estimate repair expenses to make your vehicle road-safe again. If the cost for repairs is over a certain percentage of the car’s value – say 70-80% – then the insurer may decide your car is a total loss.  They’ll then cut you a check for the value of the vehicle if you have collision insurance, minus your deductible.

What happens from there is up to you. Sometimes, drivers may have a different view of their car’s worth and it can be upsetting if your provider doesn’t see your vehicle at the same value. However, you can always go purchase a used vehicle or put the reimbursement towards a new car. You do have the option of keeping your car and paying for repairs, but that would mean obtaining a salvage title before you can legally drive your car on the roads again. Not all providers will cover cars with salvage titles and such a label can result in a more expensive premium. Only in rare situations, is it worth it to try and repair a totaled vehicle.

In other cases you may be able to use the totaled car for spare parts and just pay a salvage fee. Your insurer will likely pay you for the car’s pre-accident value minus your deductible and you are free to repair or sell car parts as you wish.

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Perhaps, you’re also wondering what happens to your totaled car when you accept a reimbursement. Typically, auto insurance companies sell your car to a salvage yard and work that into the payout price. However, it’s always a good idea to look up your car’s value before accepting a payout. While your car insurer will determine a value based on their own formula, you’re allowed to present your own documentation to claims adjusters. If you can’t reach a solution that works for both parties, you can always contact your state department to see how they handle insurance settlement complaints.

Help! I Still Owe Money on My Totaled Car

Sometimes, drivers end up purchasing a car with an auto loan through a lienholder and later the vehicle is totaled. Your insurer will write you a check and include any lienholder’s name to ensure that the money goes towards the car financing.  

However, in certain situations, you may find that your due loan is more than your car’s worth and you still owe money on the totaled car even after the insurance payout. This is a frustrating situation to be in, but you are still legally bound to pay your monthly loan payments to the lender or bank. If you have gap insurance, the difference should be covered by your policy. In general, you may want to consider purchasing gap insurance if you still have over half of your loan term left.

If you’re leasing a car that becomes totaled, then your auto insurer will send the money to the leasing company directly.

What’s Next?

Cars can be totaled for many reasons. Most of the time, it’s the result of an accident but it can also happen due to weather phenomena, such as floods, hurricanes, or falling trees. Your insurer will still payout your car’s value as long as you have comprehensive coverage for weather damages and collision coverage for car accidents.

Hearing that your car is totaled is never enjoyable, but you can make the best of it by considering your options. Try looking at the situation as a chance to find a new car and remember to remove the total loss vehicle from your insurance policy. Just make sure the total loss vehicle isn’t still registered under your name and be sure you aren’t still renting a car that you need insurance coverage for. Some providers will offer you a rental car for a period of time in the case of a total loss, but check with your carrier first.  

You can recover from a totaled car with a little time and patience. If you’re in the car buying market, check out the cheapest cars to insure