Paul Sanchez
When a car is damaged in an accident, insurance companies consider it a total loss when the cost to repair it is greater than its actual cash value (ACV) or when the vehicle's value qualifies under the insurance company's total loss formula. If a car is deemed a total loss, the insurance company will pay the owner the fair market value of the car at the time of the accident, regardless of how much money is owed on the car loan. This may result in a gap between the insurance payout and the loan amount owed, which can be covered by gap insurance. The total loss formula varies by state, with some states setting a total loss threshold of between 50% and 100%, above which a car is considered a total loss. This means that if the cost of repairs exceeds this threshold as a percentage of the car's value, the car will be declared a total loss.
| Characteristics | Values |
|---|---|
| Total loss criteria | The cost to repair the car is about the same or more than the value of the car |
| Total loss formula | Repair costs + salvage value = or > car value |
| Total loss threshold | 50-100% (varies by state) |
| Total loss claim | More complicated than getting a car repaired |
| Total loss claim options | Accept a settlement or keep the car and repair it yourself |
| Total loss claim settlement | Fair market value of the car at the time of the accident |
| Total loss claim settlement (gap insurance) | Difference between ACV and loan amount |
| Total loss claim settlement (collision coverage) | Value of the damaged vehicle minus any deductible |
| Total loss claim settlement (comprehensive coverage) | Value of the vehicle minus any deductible |
| Total loss claim settlement (uninsured motorist insurance) | Up to a specified dollar amount on the policy |
| Total loss claim settlement (rental car reimbursement coverage) | Extends coverage to a rental vehicle |
| Total loss claim value | Depends on factors like mileage, condition, and market demand |
| Total loss claim value (negotiation) | Documentation of car features, repair records, photos, and new parts |
| Total loss claim value (negotiation) | Quotes from used car dealers, local ads, and online prices for similar vehicles |
| Salvage title | Vehicle with a salvage title may be harder to sell or insure in the future |
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What You'll Learn
Total loss insurance claim process
A total loss insurance claim can be made when a vehicle is damaged or stolen, and the estimated cost of repairing or replacing it exceeds its actual cash value (ACV) or market value. This is known as a constructive total loss. Each state has unique car insurance laws, but generally, if a car is certified by an insurance company as a total loss, it is considered Beyond Economic Repair (BER). This means that the vehicle is unsafe, irreparable, or the repair costs exceed the vehicle's value.
To initiate the total loss insurance claim process, contact your insurance company to notify them of the accident and request towing assistance to a panel workshop. Take photos of your vehicle, other vehicles involved (if any), and the accident scene. The insurance company will then send an adjuster to estimate the damages and repair costs. If the repair cost exceeds the vehicle's value, the adjuster will declare it a total loss and determine its ACV.
The amount of compensation you will receive depends on your insurance policy and coverage. If you have a comprehensive insurance policy, your insurance company will pay you the ACV or market value of your car. If you have gap insurance, it can help pay off your loan if your car's ACV is less than the payoff amount. However, if you only have a third-party, fire, and theft policy or a third-party-only policy, you are not eligible to make a claim with the insurance company.
After your claim is approved, the insurance company will process the compensation payment. If you have an outstanding car loan balance, the insurance company will make the payment to the bank, and you will settle any remaining balance. It is important to note that the amount you receive from the insurance company may not be enough to pay off your car loan due to depreciation. In such cases, you will need to cover the difference out of pocket.
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Total loss insurance claim value
A total loss insurance claim value is the amount of money an insurance company will pay out when a car is declared a total loss. A car is considered a total loss when the cost of repairing it exceeds its value, or when the damage meets a state's total loss threshold. This threshold varies by state and can range from 50% to 100%. For example, in Arkansas, a car is considered a total loss if the damages exceed 70% of its value.
When a car is deemed a total loss, the insurance company will typically pay the owner the vehicle's actual cash value (ACV), which is the car's worth immediately before the damage occurred. This value includes depreciation, so the ACV will usually be less than the original purchase price of the vehicle. The insurance company may also take into account the salvage value, or the amount the car could be sold for in its damaged state.
The process of filing a total loss insurance claim typically involves contacting the insurance company, providing relevant information and documentation, and negotiating the claim. It is important to keep detailed records of all communication and to be prepared for the process to take some time, as it involves assessing the claim and inspecting the vehicle.
It is worth noting that the amount paid out by the insurance company may not always be enough to cover the remaining balance of a car loan, as the car's value may have depreciated over time. In such cases, gap insurance can help cover the difference. Additionally, if the owner chooses to keep the car and repair it themselves, the insurance company may provide a settlement amount, and the owner will need to obtain a salvage title for the vehicle.
Furthermore, total loss insurance claims can have an impact on future insurance premiums, as they may increase. It is important for individuals to carefully review their insurance policies and understand their rights and responsibilities when filing a total loss insurance claim.
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Total loss insurance and car financing
If your car is declared a total loss after an accident, your insurance company will pay you the value of the vehicle, minus any deductible, if you have the right coverages. This includes collision insurance and comprehensive insurance. If the cost to repair your vehicle is more than its actual cash value (ACV), your car insurance company will consider it a total loss. Each state has unique car insurance laws regarding total loss, with some using a total loss threshold that can vary between 50% and 100%. For example, in Arkansas, a car is considered a total loss if the damages exceed 70% of its value.
If your car is financed and you still owe money on it, your insurance settlement check will first go to your lender to pay off the remaining balance of your car loan, and you will receive whatever money is left. However, the insurance payout may not be enough to pay off your car loan because your car depreciates over time. In this case, you will be responsible for covering the remaining balance. To protect yourself from this financial risk, you can purchase gap insurance, which covers the difference between your car's ACV and the amount you owe on your car loan.
If you do not have insurance and are at fault in an accident that totals your financed car, you will be responsible for paying off the remaining loan balance. Additionally, you may face penalties for driving without insurance, including fines and a driver's license suspension. If your car is totalled by an uninsured driver, you can rely on your own insurance's uninsured motorist coverage (UMI) to help pay off your loan and replace your car, provided your policy covers property damage.
If you want to keep your totalled car, you may be able to do so, but you will have to pay for it. The car will be issued a salvage title, and you will need to obtain a new title from the Department of Motor Vehicles before you can drive it again. A vehicle with a salvage title may be harder to sell or insure in the future.
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Total loss insurance and liability
A total loss insurance claim is when the cost of repairing a vehicle is more than the vehicle's actual cash value (ACV). Each state has unique car insurance laws when a vehicle is totalled, and the process of settling a total loss car accident case can vary in duration. The time taken depends on factors such as how quickly a claim is filed, how easy it is to determine who was at fault, state laws, and whether lawyers are involved in the negotiations.
When a car is declared a total loss, the insurance company will pay the owner the fair market value of the car at the time of the accident, regardless of how much money is owed on the car loan. If the car owner is still making payments on the car loan, the insurance company will first pay the lender. If the settlement amount is more than what the owner owes the lender, the owner will receive the remainder. However, if the settlement is less than what is owed, the owner will be responsible for paying the remaining loan amount.
Liability insurance covers injuries and property damage caused to others in an accident where the policyholder is at fault. It does not cover repairs to the policyholder's vehicle. If a driver with liability insurance causes an accident that totals another person's car, their insurance will pay for the other person's losses up to the limit of their property liability coverage. If the driver has insufficient coverage, the affected party may need to turn to their collision or underinsured motorist (UIM) coverage to cover the remaining loss.
If a car is declared a total loss, the owner typically has two options. They can accept a settlement from their insurance company for the vehicle's ACV or keep the car and repair it themselves if their state allows it. If the owner chooses to keep the car, it will need to be repaired, pass inspection, and be issued a rebuilt or salvaged title before it can be driven again. A vehicle with a salvaged title may be harder to sell or insure in the future.
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Total loss insurance and salvage title
If a vehicle sustains more damage than it is worth, it is considered a total loss and becomes salvage. When a vehicle is declared a total loss, the insurance company may collect it to either scrap or sell at a salvage auction.
A salvage title indicates that a car has suffered significant damage and is no longer roadworthy. If your car is deemed a total loss by an insurance company and you decide to keep it, you'll have to apply for a salvage title. A vehicle with a salvage repairable title cannot be registered until it has passed the required salvage inspection. A salvage title is permanent, and a salvage vehicle can never be issued a clear title.
Insurance for salvage cars isn't an option. However, a car with a rebuilt title may be eligible for certain coverages at the insurer's discretion. If your insurance company accepts rebuilt title vehicles, you may have limited coverage options beyond auto liability coverage, and you can typically get liability coverage as well as any other coverages your state requires, such as uninsured motorist coverage or medical payments coverage and personal injury protection.
Depending on the insurer, you may or may not be able to get comprehensive car insurance coverage or auto collision coverage on your rebuilt title vehicle. This is because rebuilt vehicles may still have damage or issues from the accident that totaled them, making it difficult to tell the difference between old and new damage to the vehicle. Due to the vehicle's history, a vehicle that's been rebuilt may cost more to insure.
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Frequently asked questions
A total loss, or "totaled car", is when a car is considered to cost more to repair than it's worth. This can be calculated by subtracting depreciation from the cost to replace the car.
If your car is a total loss, your insurance company will pay you the fair market value of your car at the time of your accident. You can then either accept a settlement with your auto insurance company for the vehicle's ACV (actual cash value) or keep the car and repair it yourself if your state allows it.
If you owe more on your car than its ACV, you will be responsible for paying the remaining balance on your loan. Gap insurance can help cover this difference.
If your car is totaled in an accident that wasn't your fault, you can file a third-party claim under the liability coverage of the other driver's insurance. If the other driver is uninsured, your own insurance policy may include uninsured motorist coverage, which can also protect against a totaled vehicle.
