When a car is involved in an accident, insurance companies will often total the vehicle, meaning that the cost of repairing the damage exceeds the vehicle's value. This threshold varies by state, with some using a total loss formula and others implementing a total loss threshold. For example, in Alabama, a vehicle is considered a total loss if the cost of repairs exceeds 75% of the car's value, whereas in Oklahoma, this threshold is set at 60%.
Insurance companies will typically pay the owner of a totaled car its actual cash value (ACV) or fair market value minus any deductibles. Owners can also choose to keep their vehicle, but it will need to be repaired and insured, which can be challenging as the car will likely have a salvage title.
Characteristics | Values |
---|---|
When a car is considered "totaled" | When the cost of repairing the damage exceeds the vehicle's book value at the time of the crash |
Who decides if a car is totaled | Insurance companies |
What happens when a car is totaled | The insurance company pays out the car's actual cash value and takes possession of the car to sell as salvage |
Can you keep a totaled car | Yes, but the insurance total loss payout will be reduced by the car's salvage value |
Can you sell a totaled car | Yes, but it will be for scrap metal |
Can you repair a totaled car | Yes, but insurance costs for a salvage title are usually higher |
What You'll Learn
When is a car considered totaled?
When a vehicle is damaged in an accident, insurance companies will "total" it if the cost of repairing the damage is greater than the vehicle's market value at the time of the crash. This is known as a "total loss".
Each US state has its own threshold for declaring a vehicle a total loss, but insurance carriers may use a lower threshold. In Alabama, for example, the threshold is 75% or greater of the vehicle's actual cash value (ACV). If a vehicle is worth $10,000, insurers must declare it a total loss if the damage costs $7,500 or more. However, if the insurer's threshold is 60% of the ACV, the vehicle will be totalled when repair costs reach $6,000 or more.
In Nevada, a vehicle is considered totalled when the cost of repairs is equal to or greater than 65% of the fair market value of the vehicle before the accident. Exceptions are made for vehicles that are ten years or older.
Insurance companies will also total a car if they consider it would be unsafe to drive, even after repairs are made.
If a car is totalled, the insurance company will pay the owner the vehicle's actual cash value (ACV) or fair market value, which includes a reduction in value for depreciation. The owner can then use this money to purchase a new vehicle.
It is possible to keep a totalled vehicle, but it will need to be repaired, pass inspection, and be given a rebuilt or salvaged title. This can make it difficult to insure the vehicle or sell it in the future.
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How much does insurance pay for a totaled car?
When a car is deemed a total loss, insurance companies will generally pay the car's market value prior to the collision, minus your deductible and any other fees you may owe. This is also known as the Actual Cash Value (ACV). The ACV is determined by the car's age, make, model, mileage, pre-loss condition, and salvage value.
The ACV may not cover what you paid for the car, the cost of buying a new car, or the remaining balance on your auto loan. In the case that the ACV is less than the amount you owe on your loan or lease, you are still responsible for paying the remaining balance. This is where Gap Insurance can help. Gap Insurance covers the difference between the amount you owe on your loan or lease and the insurance payout.
If your car is totaled due to an accident where another driver is at fault, their property damage liability coverage should kick in. However, you will only receive a payout for the ACV of your vehicle, not the full replacement cost. If the at-fault driver is uninsured or underinsured, your uninsured/underinsured motorist or collision coverage will kick in.
If you are not at fault and do not want to haggle with another driver's insurance company, you can file a claim through your own collision insurance. For totaled car accidents where no other drivers are involved (e.g. fallen trees, floods, fires), you can file a claim through the comprehensive portion of your insurance policy.
It is important to note that insurance companies may take possession of your totaled car and sell it for scrap to recoup some of their costs. However, depending on your state's rules, you might be able to keep your totaled car. In this case, you will need to change the title to a salvage title, which is required in most states.
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What happens when your car is totaled?
When a car is "totalled," it means that the cost of repairing the car exceeds the current market value of the vehicle. In other words, it costs more to fix the vehicle than the vehicle is worth. If your vehicle has been totalled, the insurance company has the right to take possession of your vehicle when it pays out your claim. The insurance company may want to sell the vehicle to recoup some of its liability, but you could request to keep the car. If you do, the insurance company may pay you less than your vehicle's full value.
If your car is totalled and you have the right coverages, your insurance company will pay you the value of the vehicle (minus any deductible). If the accident was not your fault, you can choose to file a claim with the other driver's insurance company. If your vehicle is damaged in any way or you were hit by a driver without insurance, you may be covered by your comprehensive car insurance coverage. This will pay you the value of your vehicle, minus any deductible.
If your car is leased or loaned, the amount paid first goes to the lienholder, and any remaining money will be paid to you. It's important to remember that you should continue to make your loan or lease payments until the insurance company issues payment to your lender. Not doing so could negatively impact your credit.
If you believe your car is a total loss, you should contact your insurance company, remove all personal belongings from the car, clear any personal information from your navigation and phone systems, and remove your license plates. Give your car title and keys to the insurance company. If you can't find the title to your car, you'll need to contact your local DMV.
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Can you keep your car if it's totaled?
Yes, you can keep your car if it's been totaled, but there are some important things to consider. Firstly, a totaled car will need to be repaired to make it roadworthy again, and this can be costly. You will need to weigh the cost of repairs against the current value of the car to decide if it's worth it.
If you decide to keep your car, your insurance company will pay you the vehicle's actual cash value, minus any deductible due and the amount the car could have been sold for at a salvage yard. You will then need to apply for a salvage title, which can make it difficult to sell or insure the vehicle in the future. The car will also need to pass a state inspection to ensure it meets safety requirements.
Keeping a totaled car can be a complex and time-consuming process, and it may be more trouble than it's worth. However, if you have a sentimental attachment to the car, see potential in repairing it, or want to salvage it for parts, it may be an option worth exploring.
It's important to note that the laws and regulations regarding totaled vehicles vary by state, so be sure to check the specific requirements for your location.
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What to do when your car is a total loss?
Dealing with a total loss of your vehicle can be stressful. Here are the steps you can take to get back on the road:
File an insurance claim
Contact your insurance company and the insurance company of any other person or entity involved in the accident as soon as possible. The sooner you get in touch, the faster they will be able to process your claim.
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.
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.
Research your car's actual cash value (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.
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.
Decide what to do with your totaled car
If the insurance company still considers your car to be a total loss, you have two options: accept the check or repair the car yourself. If you decide to accept compensation from the insurance company, they'll take ownership of the car and recover its scrap value, and you can put the money toward buying a new car.
Another option is to keep the car and pay for the repairs yourself. In this case, the insurance company will send you a check for the ACV minus the salvage value of the car. After the car is repaired, you'll need a new title recording that the car is a salvage vehicle. You'll also need to get the car inspected and find affordable car insurance before you can legally drive it again.
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Frequently asked questions
A "totalled" car is a car that has been declared a total loss by an insurance company, meaning that the cost of repairing the damage exceeds the car's value.
When a car is totalled, the insurance company will pay out the car's actual cash value and take possession of the car to sell as salvage.
In most states, you can keep your totalled car. The insurance company will deduct the salvage value of the car from your settlement, and you can keep the rest. However, keeping a totalled car can make it more difficult to insure or sell the vehicle.
Insurance companies consider factors such as the car's make, model, year, mileage, and the sales price of similar cars in the area to determine the value of a totalled car.
If your car is totalled and you still owe money on it, the insurance company will pay the remaining amount to the lender or leasing company. If the payout is not enough to cover the remaining amount, you will be responsible for paying off the balance.