The Insurance Company Says My Car is a Total Loss. What Now?

A look at "total loss" designations after a car accident, and your insurance claim options.

Was a police report filed?Step 1 of 8
  • If you're making a vehicle damage claim after a car accident, and the insurer says your car is a "total loss," what does that mean, and what happens next? Here's what to know at the outset:

    • The "total loss" designation is centered on your vehicle's value at the time of your traffic accident, and the extent of necessary repairs.
    • Fault for the car accident and the insurance coverage picture will typically determine who pays for a "total loss" vehicle.
    • If you disagree with the insurance company's valuation of your vehicle, you have options.
    • Gap insurance can help if you still owe money on a totaled vehicle.

    What Is a "Total Loss" Vehicle?

    A "total loss" declaration after a car accident means a car insurance company has determined that the cost of repairing your vehicle would be above a certain percentage of the vehicle's actual cash value (ACV). Usually the threshold is somewhere between 70 percent and 80 percent of ACV or market value. In some states, the definition of a "total loss" vehicle is set by statute.

    What Is Actual Cash Value?

    Your vehicle's actual cash value is its market value at the time of the accident—not what you paid for it. Many consumers are surprised at how much (and how quickly) a vehicle's value can go down (depreciate). A brand new vehicle begins depreciating the moment its driven off the lot.

    Typically, a vehicle's actual cash value is determined by the sale price of the same vehicle (same model year, make, condition, options, etc.) in the same geographic area. Online ads and Kelley Blue Book are two ways of figuring out a vehicle's ACV. Learn more about actual cash value.

    Whose Insurer Will Pay for Vehicle Damage?

    The answer to this question depends on who was at fault for the car accident, and the details of the insurance coverage picture. Let's look at different kinds of coverage that might apply.

    Standard Liability Insurance

    Some form of liability vehicle/property damage car insurance is a requirement in every state, and it's applicability to a given car accident scenario is based on the fault principle of negligence. If you have liability vehicle/property insurance and you're found at fault for a car accident, this coverage will pay to get the other driver's car fixed or replaced, up to policy limits. (Note: these rules will apply to vehicle damage caused by a car accident even in a no-fault car insurance state. That's because no-fault car insurance applies only to car accident injuries and related losses, not to vehicle/property damage.)

    Liability insurance does not apply to your own vehicle. If the other driver was at fault for your accident, you can file a third party vehicle damage claim with their insurance company. If you're at fault for the accident, your own liability vehicle/property damage insurance won't help get your own car fixed or replaced.

    Collision Coverage

    Collision coverage is supplemental insurance coverage that covers any and all damage that your vehicle sustains in an accident, regardless of fault. Collision coverage can be pretty expensive if your car is worth a lot of money, since it pays for vehicle damage regardless of who caused the underlying accident. The key here is that with this kind of coverage, you can make a claim against your own insurer's collision coverage if you get into an accident that is your fault.

    Comprehensive Coverage

    If your vehicle is damaged in a non-accident scenario (by a fallen tree, or in a fire, for example) and you have comprehensive insurance coverage, it would likely kick in to get your car repaired or replaced. But remember, you can't use comprehensive coverage for vehicle damage resulting from a standard traffic accident.

    Who Pays: The Bottom Line

    The bottom line is that the other driver's insurer will only pay for your vehicle damage if the other driver was negligent. If you were negligent, the only way any insurer will pay for your vehicle damage is if you have collision coverage.

    How Will I Be Paid for a Total Loss Vehicle?

    You're entitled to payment of your vehicle's actual cash value (ACV) at the time of the accident, but keep in mind that an insurance company will only pay up to the limits of the applicable policy.

    For example, if the other driver was at fault and caused $25,000 of damage to your car, but he/she only has $10,000 of property damage coverage, his/her insurer will only pay $10,000 toward your repair costs. Insurance-wise, the only way for you to get the remaining $15,000 of repair costs would be from your own collision coverage (or underinsured motorist property damage coverage) if you have it.

    Whether it's a full or partial payment, you'll receive a check from the insurance company indicating a "property damage settlement" or "vehicle damage settlement" along with the claim number and other relevant details. Learn more about final settlement of vehicle damage claims.

    Note that if you have collision coverage, it might make sense to file a property/vehicle damage claim with your own car insurance company after an accident, even if you need to pay a deductible. If the other driver is ultimately deemed at fault for the crash, your insurance company will likely try to recover the deductible from the other driver's insurer. In any case, you'll almost certainly get money from your own insurance company a lot faster than you would if you wait for the other driver's insurer to accept liability and pay you a fair settlement after you've filed a third party vehicle damage claim.

    What If I Still Owe Money on a Total Loss Vehicle?

    If the insurer says that your car is a total loss, it will only pay you the fair market value of your car as of the day of the accident. Unfortunately, an insurer is only required to pay damages up to the fair market value of the destroyed property, even if you owe more than the car's value on your car loan. Let's look at an example of how this happens.

    Let's say that, on the day that the car was totaled, you owed $14,500 on your car loan, but that the current fair market value (i.e., the Blue Book value) of your car was only $12,000. The insurer is only going to pay you $12,000 toward the value of the car, leaving you with $2,500 to pay on your car loan, even though you no longer have a car. Learn more about what happens when you still owe money on a totaled car.

    What Is Gap Insurance?

    Gap car insurance coverage can help with the scenario we just described above, where you still owe money on a car that's been designated a "total loss" by the insurance company.

    When you're financing a vehicle, you don't own it, the bank does. But thanks to car loan interest rates, the rapid depreciation we discussed above concerning brand new cars occurs faster than the pace of most repayment plans. This creates a "gap" between what you still owe on the vehicle and the vehicle's actual cash value. That's where gap insurance comes in, providing coverage that will pay off the difference between the remaining loan amount and the potential insurance settlement to cover vehicle damage.

    Gap coverage may be required by the lender who is financing your vehicle purchase, and it's usually available from most car insurance companies as an additional coverage option.

    What If I Disagree with the Insurer's Vehicle Valuation?

    If you disagree with the insurer's valuation of your damages, your only real options are to:

    • accept it
    • try to negotiate further with the insurer about the figures, or
    • file a lawsuit.

    Regardless of whether you want to negotiate or sue, you will need to have some basis for disagreeing with the insurer's figures. That means hard evidence that the car is worth more than what the insurer says it's worth. You will typically need two types of evidence: evidence as to exactly what type of shape the car was in right before the accident, and evidence as to the car's actual value.

    The best way to prove the car's actual condition is reasonably current photographs of the car. If you generally have reason to think that your car is worth more than its Blue Book value because you have done some serious upgrades and work on it, or kept it in pristine condition, you should get into the habit of photographing your car regularly.

    The best way to prove a car's actual value is through the opinion of a qualified appraiser. If you disagree with the insurer's valuation of your car, you'll need a qualified appraiser to come up with an opinion as to your car's value. Simply going online and trying to use an online car value calculator won't be good enough. You are going to need an actual inspection and report from a qualified expert.

    Can I Keep a "Total Loss" Vehicle?

    Yes, you can usually keep your totaled car, but the insurance company will probably figure out the car's "salvage" or "junk" value—what selling it to a salvage yard might bring, in other words—and deduct that amount from what it pays you for the vehicle's actual cash value. So, your property/vehicle damage settlement check will be a few hundred dollars less (usually no more than $1,000), but you'll get to keep your car.

    Note that when you decide to keep a totaled vehicle, there's usually a special kind of title that needs to be obtained by the state's motor vehicles department, so you or your insurance company will probably need to do some extra legwork.

    Do I Need a Lawyer?

    You can probably handle a vehicle damage claim yourself after a car accident, if you're comfortable doing what it takes to ensure a fair result. But if you've also suffered car accident injuries, or there's a significant amount of money (or vehicle equity) on the line, you might want to discuss your situation with an experienced lawyer. Learn more about how an attorney can help with your car accident claim.

    Make the most of your claim

    Get the compensation you deserve

    We've helped 225 clients find attorneys today.

    How It Works

    1. Briefly tell us about your case
    2. Provide your contact information
    3. Choose attorneys to contact you