The Complex World Of Totaled Cars: Navigating Insurance And Salvage

When a car is deemed totaled, it means that the cost of repairing the vehicle exceeds its actual cash value (ACV) or a predetermined threshold set by the insurance policy. This can be a devastating outcome for a car owner, especially if the vehicle is new or has sentimental value. However, it's important to note that the definition of totaled varies across different states and insurance companies.

In most cases, insurance companies will consider a vehicle totaled when the repairs are likely to cost 75% or more of the car's ACV. At this point, the insurance company will typically sell the car to a salvage vendor or yard. However, you usually have the option to keep your salvaged car, but finding insurance for it may be challenging.

If you decide to accept the insurance company's settlement, they will pay you the car's ACV minus any deductible and the amount the car could have been sold for at a salvage yard. On the other hand, if you choose to keep your totaled car, you will need to follow your state's guidelines for repairs and obtain a `rebuilt title` to make it legally roadworthy again.

What is a totalled car?

A "totalled" car is one that has been deemed a total loss by insurance companies. This means that the cost to repair the vehicle is higher than its actual value, or that the car is not repairable.

Insurance companies will typically complete an inspection of the damaged vehicle before officially declaring it a total loss. When assessing your vehicle, most insurers factor in the condition and structure of your car, in addition to any state laws. In some states, a vehicle is automatically deemed to be a total loss if the cost to repair it exceeds a certain percentage of the vehicle's worth. For example, in Alabama, a vehicle is considered a total loss if the cost of repairs exceeds 75% of the car's value.

If your car is deemed a total loss, the insurance company will pay you the vehicle's actual cash value (ACV). The ACV is how much the car was worth just before the loss, including a reduction in value for depreciation. If you believe the insurer's offer is too low, you can challenge it.

When is a car considered totalled?

A car is considered "totalled" when the cost of repairing it is higher than the car's value, or actual cash value (ACV), at the time of the crash. This is also known as a "total loss".

Insurance companies will calculate the total loss ratio (cost of repairs/ACV) and compare this to limits set by state law or internally within the company. If the cost of repairs exceeds a certain percentage of the car's value, as dictated by state law, it will be considered a total loss. This is known as the Total Loss Threshold (TLT). For example, in Alabama, the TLT is 75%, so if a car is worth $10,000, the insurer must declare it a total loss if the damage costs are $7,500 or more.

Other states use a simple percentage threshold, where the car will be declared totalled if the cost of repairs is higher than a set percentage of the car's value. For instance, in Florida, a car is totalled if the cost of repairs is 80% or more of the car's ACV.

Insurance companies will also consider whether a vehicle is unsafe to drive, even after repairs are made. If so, they may declare it a total loss.

The process to determine the extent of the damage to a car may take a few days. Once the car is declared a total loss, the insurance company will pay the owner the pre-wreck value of the car, minus any deductible.

What happens when a car is totalled?

When a car is totalled, it means that the cost of repairing the vehicle exceeds its actual cash value (ACV) or a predetermined threshold set by the insurance policy. This can be a devastating outcome for a car owner, especially if the vehicle is new or has sentimental value. However, it's important to note that a totalled car doesn't necessarily mean it's severely damaged or undrivable.

• Understanding the Term "Totalled": A car is considered totalled when the cost of repairing the damage exceeds the vehicle's book value or actual cash value (ACV) at the time of the crash. This decision is made by the insurance company based on the extent of the damage and the vehicle's worth.
• Insurance Company's Assessment: After an accident, the insurance company will send an adjuster to inspect the vehicle and assess the damage. They will consider factors such as the make, model, year, mileage, condition, and demand for similar vehicles in your area. They will also take into account the resale value of the car's parts and metal.
• Determining Total Loss: If the cost of repairs plus the scrap value equals or exceeds the ACV of your car before the accident, the insurance company will declare it a total loss. This calculation varies by state, with some using a total loss threshold (TLT) and others employing a total loss formula (TLF).
• Insurance Settlement Offer: The insurance company will offer you a settlement based on the car's pre-accident value, minus any applicable deductible. You are not obliged to accept the initial offer and can negotiate for a higher settlement by providing evidence of your car's worth.
• Finalising the Claim: Once you accept the settlement offer, you will typically need to sign a power of attorney and transfer the title of your car to the insurance company. However, this is not mandatory, and you have the option to keep your totalled car.
• Keeping Your Totalled Car: If you choose to keep your totalled car, the insurance company will deduct the salvage value and any applicable deductible from your settlement offer. You will then need to arrange for repairs on your own. Keep in mind that insuring a totalled car may be challenging and expensive.
• Selling or Donating Your Totalled Car: If you decide not to keep your totalled car, you can sell it to a salvage yard or junkyard, or donate it to a charity. The insurance company will typically take ownership of the vehicle, label it as "salvage," and sell it to a salvage vendor.
• Leased or Financed Vehicles: If your totalled car is leased or financed, the insurance company will reimburse the leasing company or lender for the vehicle's worth. You will be responsible for any remaining payments on the lease or loan if the insurance payout is insufficient.
• Finding Insurance for a Totalled Vehicle: Obtaining insurance for a totalled vehicle can be difficult. Some insurance companies may not offer coverage for salvage vehicles, or they may only provide liability insurance. It's important to research and find an insurer willing to insure a totalled car before making a decision.
• Safety Considerations: Always prioritise safety when dealing with a totalled car. Even if the damage is mostly cosmetic, there may be hidden issues that affect the vehicle's roadworthiness. Extensive repairs may be required to make the car safe to drive again.

In summary, when a car is totalled, the insurance company assesses the damage, determines the vehicle's value, and offers a settlement. You have the option to keep the car or let the insurance company take ownership. Obtaining insurance for a totalled vehicle may be challenging, and repairs might be necessary to ensure safety.

Can I keep a totalled car?

Whether or not you can keep a totalled car depends on several factors. Firstly, it depends on whether you own the vehicle outright or are still paying for it. If the latter, then the final decision will rest with your bank or finance company.

If you do own the vehicle, you can keep it in most cases, but you will need to notify your insurance company and the relevant state authorities. The car's title will need to be branded as 'salvage' and it will have to pass a state inspection. You will also need to obtain insurance for the vehicle, which can be challenging.

If you decide to keep the vehicle, the insurance company will deduct the salvage value of the car from your settlement. This is the value of the vehicle post-accident in its unrepaired state.

It is worth noting that keeping a totalled car can be challenging and may not be worth the time and expense. Repairs may be costly, and the vehicle will need to pass a state inspection before it can be driven again. Additionally, finding insurance for a vehicle with a salvage title can be difficult.

How much does insurance pay for a totalled car?

When a car is deemed a total loss, insurance companies will generally pay the car's market value or actual cash value (ACV)—that is, the resale price or the amount it could have been sold for before the damage occurred—minus your deductible and any other fees you may owe. This amount is determined by factors such as the year, make, model, and mileage of the car.

However, there is no clear-cut method for determining the value of your totalled vehicle. Ultimately, it is up to the adjuster to decide, but the amount may be open to discussion. You can calculate a possible insurance payout for your totalled car using tools like Kelley Blue Book (KBB) or Edmunds, which aggregate data from real-world used-car sales.

If you have a loan or lease on your car, the insurance company will pay the amount you owe to your loan provider. If there is anything left, you will receive the remainder. If you leased your car, the same thing applies.

Additionally, if you have Guaranteed Auto Protection (GAP) insurance on your policy, the difference between what you owe on your vehicle and what the insurance company pays out will be covered. This type of coverage is good to have if you owe more for your car than it is worth. However, you will never see the money from this type of coverage, as it goes directly to the lender.

In some cases, insurance companies may offer guaranteed replacement coverage, which means they will replace your car if it is less than three years old.

Frequently asked questions