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.

Updated by , J.D. | Updated by Stacy Barrett, Attorney
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  • The good news is that you survived a car accident. The bad news is that an insurance company says your car is a "total loss." What does that mean? What happens next?

    Here's what you need to know:

    • An insurance company decides your car is a "total loss" (totaled) when the cost to repair the car is more than your car's actual cash value (ACV) at the time of the car accident.
    • In most states, the person who is at fault for the accident (or that person's insurer) pays for accident-related losses (called damages).
    • If you disagree with the insurance company's valuation of your vehicle, you can dispute it.
    • Gap insurance covers the difference between your car's ACV and the amount you still owe on your car loan when you total a financed car.

    Totaled Car Meaning: When Is a Car Considered Totaled?

    Insurers consider a vehicle a "total loss" when the cost to repair it is greater than its "actual cash value" (ACV).

    A vehicle's ACV is its market value at the time of the accident—not what you paid for it. Many people are surprised at how much (and how quickly) a vehicle's ACV goes down (depreciates). A brand new car famously loses value the second a buyer drives it off the lot.

    You can figure out your vehicle's actual cash value by looking at the going rate for similar cars (same model year, make, condition, options) in your area using tools like Kelley Blue Book.

    Most states have a "total loss formula" (TLF) for when insurers must total a car. For example, state law might require an insurer to total a car when the cost to repair it is more than 75% of the car's ACV. Other states might set the threshold lower or higher. States without a TLC typically weigh the cost to repair and salvage a car against the car's ACV. An insurer might also total your car if it can't be repaired safely.

    For example, let's say you live in a state where lawmakers set the total loss threshold at 60%. You crash your Honda Civic valued at $4,800. If your mechanic says repairs will cost $2,880 or more, the insurer will likely total your car. If your mechanic can fix it for less than that, the insurer will likely authorize repairs.

    If the insurer declares your car a total loss, it will typically pay you (or your lender if you still owe money on the car) the fair market value (ACV) and take possession of the car.

    Your Options After Your Car Is Totaled

    A total loss insurance claim is typically more complicated than getting a car repaired. Knowing what to do and what your options are can help you speed up the insurance claim process and get the best outcome possible.

    Five Steps to Take Right After Your Car Is Totaled

    Most total loss accidents are pretty serious. The most important thing for you to do is to take care of your physical health and well-being after an accident. Once the shock of the accident has passed, you should:

    1. File an insurance claim as soon as possible. Total loss claims can take a long time to process, so contact your insurance company and the insurance company of any other person or entity involved in the accident as soon as possible. For example, if another driver hit you, contact your insurer and that driver's insurer to report the accident.
    2. Tow your car to an approved auto shop. You can tow your car to any auto shop, but the claim process will be smoother if you tow it to an auto shop approved by the insurance adjuster handling your claim. The shop will give your adjuster an estimate for repairs and the adjuster will decide whether to total the car.
    3. Get your paperwork together. You'll need to provide the insurance company with your car's title. If you don't have it, you can request a copy from the Department of Motor Vehicles in your state. If your car is totaled, you'll probably have to sign the title over to the insurance company.
    4. Research your car's ACV. Before you agree to an insurance payout for a totaled car, you need to do your own research on your car's ACV. Look at auto websites, newspapers, and car dealerships in your area to see the current market value for cars like yours and use online tools like Kelley Blue Book.
    5. Review your car loan. If your car is financed, you'll need to know how much you owe on your car loan. The insurer will pay settlement money to your lender first. Then you will get whatever money is leftover.

    Can I Keep a Totaled Car?

    You can usually keep your totaled car, but the insurance company will probably figure out the car's "salvage" or "junk" value—how much they might get from selling it for parts —and deduct that from your car's ACV. So, your settlement check will be smaller, but you'll get to keep your car.

    Think carefully about whether it makes financial sense to keep a totaled car. You'll need to have it repaired, inspected, and reinsured to get the car back on the road.

    Some people choose to donate their totaled cars to charitable organizations in exchange for a tax deduction. You can ask your favorite charity if they work with a car donation service or auction house. Some state recycling programs list organizations willing to accept unwanted cars as charitable donations.

    What If I Want to Total the Car but the Insurance Company Doesn't?

    You can ask the insurance company to total your car, but insurers ultimately decide whether to total a car based on the car's market value and the extent of the damage.

    Do You Pay a Deductible When Your Car Is Totaled?

    You might have to pay your deductible for a totaled car. Your deductible is the amount you agree to pay out-of-pocket after a covered loss. Usually, a deductible is a set dollar amount. For example, if the ACV of your totaled car is $5,000 and you have a $1,000 deductible, your insurer will pay out $4,000 ($5,000 - $1,000 deductible).

    You might not have to pay the deductible if you aren't at fault for the accident that totaled your car. In most states, the at-fault driver's liability insurance covers accident-related losses, including deductibles.

    Who Pays for the Total Loss Car?

    The process for getting compensation for a totaled car depends on who was at fault for the accident and whether you are filing a claim under your own car insurance policy or making a third-party claim.

    Let's take a look at different kinds of insurance coverage that might apply in an accident involving a total loss car.

    Standard Liability Insurance

    Almost all states require that every registered vehicle and licensed driver have some liability insurance. If you are at all legally responsible for a car accident (negligent), your liability coverage compensates other people for their injuries and damage to their property. (About a dozen no-fault car insurance states have a different system, but liability insurance typically covers property damage even in those states.)

    If your car was totaled in an accident that wasn't entirely your fault, you can file a third-party claim under liability coverage with the other driver's or car owner's insurance company.

    Liability insurance doesn't cover your car. If you're at fault for the accident, your own liability insurance won't help you fix or replace your car.

    Collision Coverage

    Collision coverage is supplemental insurance that covers accident-related damage to your car, regardless of fault. Even if you caused the accident that totaled your car, you may be able to collect payment from your car insurance company if you carry collision coverage. Once you settle a claim under your collision coverage, you give up the right to collect that amount from the other driver's or car owner's insurance company for the same property damage.

    Comprehensive Coverage

    Comprehensive insurance covers damage that isn't caused by a collision with another car. For example, if your car is totaled by a fire, a fallen tree, or severe weather, your comprehensive insurance coverage will likely kick in. Comprehensive coverage also might cover damage caused by hitting an animal while driving depending on your policy.

    Uninsured Motorist Insurance (UIM)

    Unfortunately, even though states require car owners and drivers to have insurance, some people still drive without it or with inadequate coverage. If you have an accident with an underinsured or uninsured driver, you might be able to get compensation for your totaled car from your uninsured motorist coverage (UIM), if you have it.

    The Bottom Line on Who Pays

    The bottom line is that the other driver's or car owner's insurer will pay for your totaled car if the other driver was at fault for the accident (negligent). But your compensation might be limited if you don't have valid insurance in place at the time of the accident, even if you aren't at fault for the accident.

    If the at-fault driver is underinsured or uninsured, you'll have to turn to your collision or UIM coverage.

    If you caused the accident, your liability coverage will pay other people for their injuries and damage to their property, but you'll have to rely on your collision coverage to pay for your totaled car.

    If you total a car without collision insurance, then your insurer will not reimburse you for the ACV of your car. Learn more about what happens when you're in a car accident and uninsured.

    How Much Will Insurance Pay for My Totaled Car?

    Each type of insurance coverage—liability, collision, comprehensive, UIM—has its own policy limits. The policy limit is the total amount the insurance company will pay for a single accident or claim.

    For example, say a driver rear-ends you and totals your car. Your car's AVC is $25,000, but the at-fault driver has only $10,000 of property liability coverage. That driver's insurer will pay only $10,000 toward your total loss settlement. The only way for you to get the remaining $15,000 of your car's ACV would be from your own collision coverage or underinsured motorist coverage.

    You can also sue the at-fault driver, but it might not be worth the effort and expense unless you're fairly sure that driver has assets that you can collect if you win in court.

    Who Gets the Settlement Check?

    If you own the car, the insurance company will pay you directly. If your car is financed, the insurance company will pay your lender first. If the settlement amount is more than what you owe your lender, you'll receive the rest. If the settlement amount is less than what you owe, you'll be responsible for paying the rest of your loan.

    Learn more about final settlement of vehicle damage claims.

    Timeline for a Total Loss Settlement

    The amount of time it takes to settle a total loss car accident case varies from a few weeks to many months. The timing depends on how quickly you file your claim, how easy it is to figure out who was at fault for the accident, state laws, and whether lawyers are involved in the negotiations.

    Most states require insurance claims to be processed without unnecessary delays, but investigations and negotiations can take a while. Insurance companies investigate who's responsible for the accident and whether there's coverage for property damage, injuries, and other losses. You won't receive settlement until the insurer sorts out both liability and coverage. Stay in touch with your adjuster and ask for regular updates on the status of your 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 at the time of your accident, no matter how much money you owe on your car loan.

    For example, let's say that on the day you total your financed car, you still owe $14,500 on your loan. But the actual cash value of your car is only $12,000. The insurer is only going to pay you $12,000, leaving you with a balance of $2,500 to pay on your loan for a car you can no longer drive.

    Learn more about what happens when you still owe money on a totaled car.

    What Is Gap Insurance?

    Gap car insurance can help cover the difference between your totaled car's ACV and what you owe on your loan.

    When you're financing a vehicle, you don't own it, the bank does. As you pay off your car loan, you will often owe more than your car is currently worth because of car loan interest rates and depreciation. Gap insurance covers the difference ("gap") between what you still owe on your financed car and the car's ACV.

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

    What If I Disagree With an Insurer Over a Totaled Car?

    If you disagree with the insurer's valuation of your car or repair estimate, you can:

    • hire your own appraiser and mechanic
    • negotiate with the insurer
    • contact your local department of insurance, and
    • talk to a lawyer about requesting arbitration or filing a lawsuit.

    If you want to dispute the insurer's valuation of your car or estimate for repairs, you need to have evidence that your car is worth more than what the insurer says it's worth or that you can fix it for less than the insurer's estimate.

    You can dispute the insurer's valuation of your car with documentation of upgrades and maintenance records and current photographs proving that the car is in pristine condition. If necessary, you can hire your own qualified appraiser who can inspect your car and prepare a report.

    How to Get a New Car After a Total Loss Accident

    Insurance companies don't replace totaled cars with new cars and they don't pay off car loans. So your ability to get a new car after your car is totaled depends on how much your car is worth, how much you still owe on it, and insurance coverage.

    Once you've figured out your loan payoff amount and the amount the insurance company intends to pay for the loss, you can calculate how much money you will have to put down on your next car.

    If you are stuck owing money for a totaled car, your lender might be able to consolidate what you owe into a new car loan.

    Talk to a Car Accident Lawyer

    You might be able to handle your own insurance claim. But if you have questions about your rights and options, talk to a car accident lawyer. A lawyer can answer your questions, negotiate with insurers, and represent you in court if necessary. It's worth the expense of hiring a lawyer when you don't feel the insurer is offering a fair settlement for your totaled car.

    Learn more about how an attorney can help with your car accident claim. You can also connect with a lawyer directly from this page for free.

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