Haris Ashley
If your car is damaged in an accident and the cost to repair it is more than the car's actual value, it may be considered totaled. If your car is deemed a total loss, your insurance company will pay you the value of the vehicle minus any deductible. However, if you are deemed not at fault, you can choose to file a claim with the other driver's insurance company.
| Characteristics | Values |
|---|---|
| When is a car considered a total loss? | When the cost of repairing the car exceeds its market value at the time of the accident, or when the car cannot be repaired safely. |
| Who pays for the total loss? | The at-fault driver's insurance company or your own insurance company, depending on who is at fault for the accident. |
| What happens if the at-fault driver doesn't have insurance? | You can file a claim with your own insurance company if you have uninsured motorist coverage (UMPD/UIMPD). |
| What if I still owe money on my car loan/lease? | You may have to pay the difference between the insurance payout and the remaining loan/lease amount out of pocket. Gap insurance can cover this difference. |
| Do I have to pay a deductible for a total loss? | Yes, you may have to pay your deductible, unless you are not at fault for the accident. |
| How much will insurance pay for a total loss? | It depends on the coverage you have in your policy. Collision and comprehensive coverage will pay the actual cash value (ACV) of your car. |
| What if I disagree with the insurer's valuation? | You can hire your own appraiser and mechanic, negotiate with the insurer, contact your local department of insurance, or consult a lawyer. |
What You'll Learn
Collision insurance
If your car is damaged but not totaled, collision insurance will pay to repair your car to its previous condition, minus your deductible. If your car is totaled, collision insurance will pay the actual cash value of your vehicle, minus your deductible. Without collision insurance, you could be stuck paying thousands of dollars for car repairs or for a new vehicle.
If your car is totaled and you have a loan that's more than the value of your car, you'll still have to pay the remaining balance on your loan. In this case, it's a good idea to consider purchasing gap insurance, which can help cover the difference and pay off the loan.
When deciding whether to purchase collision insurance, consider the value of your vehicle and your ability to pay for repairs or a replacement vehicle out of pocket. Collision insurance becomes less valuable over time, as it will never pay out more than the car's value. If your car is older and has a low market value, collision coverage won't pay out much, if anything, in a total loss.
If you're in a crash and another driver is at fault, their liability insurance will typically pay for the damage to your car. However, liability insurance minimums vary by state and may not be sufficient to cover the cost of repairs or a replacement vehicle. In this case, your collision insurance would cover the remaining cost.
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Comprehensive insurance
When choosing a comprehensive deductible, it is important to strike a balance between paying too much out of pocket and not paying more than you can afford in monthly premiums. Consider factors such as your budget, the value of your vehicle, your savings, and the likelihood of making a claim.
If your car is declared a total loss due to a problem covered by your comprehensive insurance, you can file a claim with the insurance company. You will receive a check for the settlement amount minus your deductible, which can be used towards purchasing a new car.
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Gap insurance
For example, if you owe $25,000 on your loan and your car is only worth $20,000, without gap insurance, your insurer would pay out $20,000 (minus your deductible), leaving you with a $5,000 gap. With gap insurance, you would receive the extra $5,000 needed to pay off your loan.
It's a good idea to consider buying gap insurance if you:
- Made a small down payment (less than 20%)
- Financed for 60 months or longer
- Leased the vehicle (gap insurance is generally required for a lease)
- Purchased a vehicle that depreciates faster than average
- Rolled over negative equity from an old car loan into the new loan
You can typically buy gap insurance from your car insurance company, car dealerships, banks, and credit unions. It's worth noting that standalone policies are also available from companies like Gap Direct. On most auto insurance policies, including gap insurance with collision and comprehensive coverage adds only about $20 a year to the annual premium.
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New car replacement insurance
In the event of a total loss, new car replacement insurance will pay out the cost of a brand-new car of the same make and model, minus your deductible. This is in contrast to standard auto insurance, which would only pay out the depreciated value of the vehicle at the time of the accident. For example, if you purchased a new car for $30,000 and it was totaled a few months later, valued at $24,000 at the time of the accident, standard insurance would pay out $24,000, whereas new car replacement insurance would pay out enough to buy a brand-new car of the same make and model.
The cost of new car replacement insurance varies depending on factors such as the vehicle's purchase price, location, and other considerations. It is typically offered as an add-on to your existing policy, and the price is calculated as a percentage of your comprehensive and collision coverage premium. For example, Farmers Insurance quotes a range of 5% to 13% of your comprehensive and collision coverage cost.
When considering new car replacement insurance, it is important to understand the terms and conditions, as well as compare costs with other options such as gap insurance or better car replacement coverage. It is also crucial to cancel this type of insurance once your car exceeds the age or mileage limits specified by your insurer to avoid paying for expired coverage.
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Rental reimbursement insurance
Some insurance companies have partnerships with rental car companies, allowing for direct billing between the rental company and the insurance provider. If you choose to rent from a different company, you may have to pay the costs upfront and then seek reimbursement from your insurance company.
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Frequently asked questions
A total loss is when a car insurance company decides that the cost to repair your vehicle exceeds (or is close to exceeding) what your vehicle is worth.
If the cost to repair your car after an accident exceeds the value of the car, it may be considered a total loss. Your car may also be considered a total loss if it meets certain criteria set by your state.
If your car is a total loss, your insurance company will pay you the value of the vehicle (minus any deductible and applicable state taxes and fees) if you have the right coverages.
A 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 totalled car is $5,000 and you have a $1,000 deductible, your insurer will pay out $4,000.
