Do You Need To Keep Paying Insurance After Your Car Is Totaled?
Why You Can Trust EverQuote
EverQuote powers millions of shopper requests every month, teaming up with industry-leading insurance specialists to address real-world challenges faced by people every day. We partner with the largest insurance providers in the nation, and our content is carefully crafted by experts and reviewed by licensed insurance agents for accuracy and relevance.
No matter the cause, totaling your car can be a scary and frustrating experience. If you have recently experienced a total loss event, you might be wondering how you will get where you need to go, what expenses you're responsible for, and if you must continue paying for insurance after the car is totaled.
This guide will help you navigate the total loss car insurance process after an auto accident or incident and understand if you must continue paying premiums after the vehicle is declared a total loss.
Understanding Totaled Cars
The definition of a “totaled car” goes beyond its appearance. Insurance companies consider a car totaled when the cost to repair it exceeds its book value immediately prior to the accident. They will also total a car that is deemed unsafe to drive — even after repairs are made.
While states have varying thresholds for determining when a vehicle is a total loss, insurance companies may also set their own thresholds. Sometimes, insurers will total a vehicle even if the cost to repair it appears to be less than the vehicle’s value since it's hard to assess both damage and potential repair costs before getting started.
If your insurance company determines that your car is not worth repairing, it will be declared a total loss, and your insurer may replace the vehicle with an equivalent option or offer a cash settlement.
Finally, if you're wondering what to do after an accident, there are steps you can take to mitigate the situation and ensure your safety.
Insurance Obligations Post-Total Loss
The big question is, “Do I need insurance after a total loss?” The answer is “yes” — unless you're planning on going vehicle-free from now on.
While some people think they can save money by canceling their insurance while searching for a new car, you will likely face higher insurance costs based on the totaled car and the fact that most companies offer various discounts for loyalty and long-term customers. In other words, it pays to maintain consistent insurance coverage.
If you don't have collision or comprehensive coverage, you may incur some out-of-pocket expenses, such as the cost of a loaner vehicle.
The good news in a challenging situation is that your insurance company will likely replace your vehicle with a comparable model or offer you the cash equivalent of the value of your previous vehicle.
The types of insurance that cover a total vehicle loss include:
- Collision coverage: This option, just like the name indicates, is insurance for car collisions or crashes.
- Comprehensive coverage: This broader type of insurance covers damage from severe weather, vandalism and theft, animals, and other non-crash events.
- Uninsured motorist: If the driver of the other vehicle in the crash was uninsured or underinsured, this coverage should kick in.
- Property damage: The other at-fault driver’s property damage liability insurance may also cover the damage to your vehicle.
As obvious as it may sound, you don't want to get into a car accident without insurance, as the penalties can be severe.
Options After Your Car Is Totaled
After your car is totaled, you might have more options than you realize. For starters, if you believe the vehicle is safe to drive, you can continue to do so, but it is always smart to have a mechanic take a closer look before you get behind the wheel again.
You can also choose to:
- Sell it (or sell it for parts)
- Donate it to charity
- Trade it in
- Repair it yourself
You might also want to consider gap insurance for outstanding loans. Gap insurance works like it sounds and will help you bridge the gap if you still owe more on the vehicle than its market value when it's totaled. You must already have collision and comprehensive auto insurance if you're looking at gap insurance, which is generally inexpensive.
Here’s an example of how gap insurance works. Suppose you still owe $10,000 on your car, but its actual cash value is now just $4,000 after being totaled. If you have a $500 insurance deductible and your insurance carrier pays the remaining $3,500, you would owe $6,000 if you didn’t have gap insurance. Gap insurance, however, will cover those costs, so you don’t have to pay for them.
Recommendations for Policyholders
It's a good idea to evaluate your insurance needs regularly, particularly after a total loss event. Consider if your current insurance meets your needs going forward.
If you have questions about insurance coverage in the event of a totaled vehicle, EverQuote can help. Complete this simple form for a free custom comparison of insurance options.
It only takes a couple of minutes and can save you precious time and money in the long run. We can also help you find car insurance after an accident.
After a total loss, here are the steps to take to get back on track:
- Call your insurance company and file a claim. Insurance claims get the ball rolling and reduce your time without a vehicle.
- Estimate your car’s value ahead of the accident. The Kelley Blue Book is an excellent source for assessing your car’s fair market value. Knowing this information before negotiating with your insurance company will help prevent surprises.
- Meet with an insurance adjuster. Insurance adjusters can determine how much damage was inflicted on your vehicle and provide a repair estimate.
- Discuss your claim with your insurance company. If you believe the assessment is unfair or too low, you can negotiate a cash settlement or insurance settlement. Stay in regular communication with your insurer.
Finally, if you have a car loan or lease, you should contact your lender. And continue making payments to avoid a ding to your credit report. When the process is complete, your insurer will make an insurance payout to your lender.
While no one ever wants to experience a total loss event, taking quick action, knowing what your vehicle is worth, and maintaining consistent insurance coverage will help put you in the driver’s seat.