Totaled Car Insurance

If your car has been “totaled” after an accident, it means the cost of repairing it is greater than the cost to replace it. A car can also be considered a total loss when it’s not safe to repair, or if it simply can’t be returned to its pre-accident condition. 

What’s a totaled car?

After you’ve been in an accident, the insurance adjuster looks at your car’s damage. In some cases they could declare it totaled. Even if you managed to drive the car away from the scene, it could still be totaled if the cost of repairs exceeds its value. 

In short: A totaled car is a car that’s been in a car accident, or otherwise damaged, after which the cost of repairs (plus its salvage value) exceeds its actual cash value.

For example, a car worth $5,000 that needs $7,000 of repairs will be declared totaled. 

Or perhaps the car is worth $3,000 and needs $2,600 of repairs, but its salvage value — the value of its parts and metal—is around $500. In this case, the repair costs and salvage value are more than the car’s value, and it’d be totaled. 

If your airbags deployed, don’t assume that you’ll be filing a total loss claim. The formula above still applies, but the adjuster will include the cost to replace your airbags as part of the cost of repairs.

How much will my car insurance pay for my totaled car?

The payout on your totaled car depends on your specific insurance policy, the amount you owe on your loan (if you have one), and your deductible. Most car insurance policies contain both collision coverage and comprehensive coverage. The type of loss you’re involved in determines which one kicks in.

Collision coverage

If you get in a covered accident with another car or object, collision coverage covers the damage. 

Comprehensive coverage

Comprehensive coverage pays for other types of damage—from vandalism, theft, or hail, for example. 

Many state laws require that drivers carry a minimum amount of insurance coverage to protect all drivers. Your insurer will pay out up to the actual cash value of the vehicle. 

Even when your car is a total loss, you have to pay your deductible for your collision or comprehensive coverage. Sometimes you have to pay it up front; other times your insurance company will subtract it from your cash’s actual cash value before sending the reimbursement. 

An adjuster estimates your car’s actual cash value (or ACV) based on its make, model, year, mileage, vehicle options, and condition. They could consult the Kelley Blue Book to determine your car’s fair market value, which would be its value on the open market if it hadn’t been in an accident, and deduct the repair costs.

What happens after my car is declared a total loss?

Before you can get paid, you’ll most likely have to release your vehicle to your insurance company, remove any personal items from the car, and sign any necessary paperwork. 

If you have a car loan, let your lender know that the insurance company will be contacting them. The lender will transfer the title into their name, convert it to a salvage title, and probably sell the totaled vehicle to a salvage yard. 

Plan on getting a rental car to drive while shopping for a new car. Most auto insurance policies include rental car coverage with a daily amount that they’ll reimburse. 

Can I decide to keep my totaled car and get it fixed on my own?

If you own your vehicle outright, without a loan or lien, there’s generally no reason that you can’t keep your totaled car if you really want to. (In that case, your insurer will deduct the salvage value from your settlement.) Just because an insurer thinks your damaged vehicle isn’t worth repairing doesn’t mean that it can’t be repaired. If you really love the car, you could try to fix it up yourself.

Totaled cars that their owners hold onto are referred to as “owner-retained salvage.” Relevant state laws can vary here, so check with your claims adjuster before going down this route. If the DMV converts your title into a salvage title it could be difficult to obtain insurance for your beloved car again after you’ve gotten it roadworthy.

What if I still owe money or have a lease on my car?

If you still owe money on your car, your insurance company will pay the actual cash value to your lender. They’ll reimburse you any money left over after your car loan has been cleared. 

If the ACV isn’t enough to pay off the balance on your loan, you’ll have to roll your balance into a new loan or pay your lender the difference, unless you have gap insurance. Gap insurance covers the “gap” between the insurance company payout and the balance owed on your loan. 

The same thing happens with a leased car. Your insurance company pays the settlement to the leasing company and you get anything left over (or have to make up the difference).