The good news is that you survived a car accident. The bad news is that an insurance company says your car is a “total loss.” what does that mean? what happens next?
Here’s what you need to know:
- an insurance company decides your car is a “total loss” (totaled) when the cost to repair the car is more than the actual cash value (acv) of your car at the time of the car accident .
- In most states, the person at fault for the accident (or that person’s insurer) pays for losses related to the accident (called damages).
- If you disagree with the insurance company’s valuation of your vehicle, you can dispute it.
- gap insurance covers the difference between your car’s acv and the amount you still owe on your car loan when you total a financed car.
meaning of totalized car: when is a car considered totaled?
Insurers consider a vehicle a “total loss” when the cost to repair it is more than its “actual cash value” (acv).
The ACV of a vehicle is its market value at the time of the accident, not what you paid for it. Many people are surprised at how much (and how quickly) a vehicle’s ACV drops (depreciates). A new car loses value the moment the buyer drives it off the dealership.
You can calculate the actual cash value of your vehicle by looking at the going rate for similar cars (same model, year, make, condition, options) in your area using tools like Kelley Blue Book.
Most states have a “total loss formula” (tlf) for when insurers must total a car. For example, state law may require an insurer to pay in full on a car when the repair cost is more than 75% of the car’s ACV. other states may set the threshold lower or higher. States without an FTA often weigh the cost of repairing and salvaging a car against the car’s ACV. An insurer might also total your car if it can’t be safely repaired.
For example, let’s say you live in a state where legislators set the total loss threshold at 60%. you crash your honda civic valued at $4,800. If your mechanic says the repairs will cost $2,880 or more, the insurance company will likely destroy your car. if your mechanic can fix it for less than that, the insurance company will likely authorize the repairs.
If the insurer declares your car a total loss, they will typically pay you (or your lender if you still owe money on the car) the fair market value (ACV) and take possession of the car.
your options after adding your car
A total loss insurance claim is usually more complicated than repairing a car. Knowing what to do and what your options are can help you speed up the insurance claim process and get the best result possible.
five steps to take immediately after your car is totaled
Most total loss accidents are quite serious. The most important thing to do is take care of your physical health and well-being after an accident. once the scare of the accident has passed, you should:
- File an insurance claim as soon as possible. Total loss claims can take a long time to process, so contact your insurance company and the insurance company of any another person or entity involved in the accident as soon as possible. For example, if you were hit by another driver, contact your insurer and that driver’s insurer to report the accident.
- have your car towed to an approved auto shop. you can have your car towed to any auto shop, but the claim process will be easier if you have it towed to an adjuster-approved auto shop insurance company handling your claim. the shop will give your adjuster an estimate for the repairs and the adjuster will decide whether to total the car.
- gather your paperwork. You will need to provide the insurance company with your car title. if you don’t have one, you can request a copy from your state department of motor vehicles. If your car is totaled, you’ll probably have to transfer the title to the insurance company.
- Research your car’s acv. Before you accept an insurance payment for a wrecked car, you should do your own research on your car’s ACV. Search auto websites, newspapers, and car dealers in your area to see the current market value of cars like yours, and use online tools like the 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 first pay the settlement money to your lender. then you will get the money you have left over.
can I keep a wrecked car?
Usually you can keep your car totaled, but the insurance company will probably calculate the “salvage” or “junk” value of the car (how much they could get by selling it for parts) and deduct it from your car’s ACV . therefore, your settlement check will be less, but you will be able to keep your car.
Think carefully about whether it makes financial sense to keep a wrecked car. you’ll need to get it repaired, inspected, and reassured to get the car back on the road.
Some people choose to donate their wrecked cars to charity in exchange for a tax deduction. You can ask your favorite charity if they work with a car donation service or auction house. Some state recycling programs list organizations willing to accept unwanted cars as charitable donations.
what if I want to total the car but the insurance company doesn’t?
You can ask the insurance company to total your car, but insurers ultimately decide whether to total a car based on the car’s market value and the extent of the damage.
Do you pay a deductible when your car is totaled?
You may have to pay your deductible for a wrecked car. Your deductible is the amount you agree to pay out of pocket after a covered loss. Generally, a deductible is a fixed dollar amount. For example, if your car’s total ACV value is $5,000 and you have a $1,000 deductible, your insurer will pay $4,000 ($5,000 – $1,000 deductible).
You may not have to pay the deductible if you were not at fault for the accident that destroyed your car. In most states, at-fault driver’s liability insurance covers accident-related losses, including deductibles.
who pays for the total loss of the car?
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The process for getting compensation for a wrecked car depends on who was at fault for the accident and whether you’re filing a claim under your own auto insurance policy or making a claim from a third party.
Let’s take a look at the different types of insurance coverage that could apply in an accident involving a total loss car.
standard liability insurance
Nearly all states require all registered vehicles and licensed drivers to carry some form of liability insurance. If you are legally responsible for a car accident (negligence), your liability coverage compensates others for your injuries and damage to their property. (About a dozen states with no-fault car insurance have a different system, but liability insurance generally covers property damage even in those states.)
If your car was totaled in an accident that was not entirely your fault, you may be able to file a third-party claim under liability coverage with the other driver’s or car owner’s insurance company.
Liability insurance does not cover your car. If you are at fault for the accident, your own liability insurance will not help you repair or replace your car.
Collision coverage is supplemental insurance that covers damage to your car related to an accident, regardless of fault. Even if you caused the accident that destroyed your car, you may be able to collect payment from your auto insurance company if you have collision coverage. once you settle a claim under your collision coverage, you give up the right to collect that amount from the other driver’s or car owner’s insurance company for the same property damage.
Comprehensive insurance covers damage that is not caused by a collision with another car. For example, if your car is destroyed by fire, a fallen tree, or bad weather, your comprehensive insurance coverage will likely kick in. Comprehensive coverage might also cover damage from hitting an animal while driving, depending on your policy.
uninsured motorist insurance (uim)
Unfortunately, even though states require car owners and drivers to have insurance, some people still drive without it or with inadequate coverage. If you’re in an accident with an underinsured or uninsured driver, you may be able to get compensation for the total loss of your car from your uninsured motorist (UIM) coverage, if you have it.
the bottom line on who pays
The bottom line is that the other driver’s or car owner’s insurer will pay for your totaled car if the other driver was at fault for the accident (negligence). But his compensation may be limited if he does not have insurance in force at the time of the accident, even if he is not at fault for the accident.
If the at-fault driver is underinsured or uninsured, you’ll need to turn to your collision or uim coverage.
If you caused the accident, your liability coverage will pay others for your injuries and property damage, but you’ll have to rely on your collision coverage to pay for your wrecked car.
If you total a car without collision insurance, then your insurer will not reimburse you for the acv on your car. Learn more about what happens when you’re in a car accident and you don’t have insurance.
how much will insurance pay for my wrecked car?
Each type of insurance coverage (liability, collision, comprehensive, uim) has its own policy limits. The policy limit is the total amount the insurance company will pay for a single accident or claim.
For example, suppose a driver hits you from behind and destroys your car. The AVC on his car is $25,000, but the at-fault driver has only $10,000 of liability coverage. That driver’s insurer will pay only $10,000 toward your total loss settlement. the only way to get the remaining $15,000 from your car’s acv would be through your own collision coverage or underinsured motorist coverage.
You can also sue the at-fault driver, but it may not be worth the effort and expense unless you’re pretty sure the driver has assets you can collect on if you win in court.
who gets the settlement check?
If you own the car, the insurance company will pay you directly. If your car is financed, the insurance company will pay your lender first. If the settlement amount is more than what you owe your lender, you will receive the rest. If the settlement amount is less than what you owe, you will be responsible for paying the rest of your loan.
learn more about final settlement of vehicle damage claims.
timeline for a total loss settlement
The amount of time it takes to settle a total loss car accident case varies from a few weeks to many months. timing depends on how quickly you file your claim, how easy it is to determine who was at fault for the accident, state law, and whether attorneys are involved in the negotiations.
Most states require that insurance claims be processed without unnecessary delay, but investigations and negotiations can take time. insurance companies investigate who is responsible for the accident and whether there is coverage for property damage, injuries and other losses. You will not receive a settlement until the insurer resolves both the liability and the coverage. stay in touch with your adjuster and request regular updates on the status of your claim.
what if I still owe money on a total loss vehicle?
If the insurer says your car is a total loss, they will only pay you the fair market value of your car at the time of the accident, no matter how much money you owe on your car loan.
For example, let’s say the day you total your financed car, you still owe $14,500 on your loan. but the actual cash value of his car is only $12,000. the insurer will only pay you $12,000, leaving you with a balance of $2,500 to pay off your loan for a car you can no longer drive.
Learn more about what happens when you still owe money on a wrecked car.
what is differential insurance?
gap car insurance can help cover the difference between your car’s total acv and what you owe on your loan.
When you are financing a vehicle, you are not the owner, the bank is. As you pay off your car loan, you will often owe more than your car is currently worth due to interest rates and car loan depreciation. gap insurance covers the difference (“gap”) between what you still owe on your financed car and the car’s acv.
Gap coverage may be required by the lender financing your car purchase and is typically available through lenders and most auto insurance companies.
what if I disagree with an insurer about a totaled car?
If you disagree with your auto insurance company’s estimate or repair estimate, you can:
- hire your own appraiser and mechanic
- negotiate with the insurer
- contact your local insurance department and
- Talk to an attorney about requesting arbitration or filing a lawsuit.
If you want to dispute your car’s insurer’s valuation or estimate for repairs, you must have evidence that your car is worth more than the insurer says it is or that you can repair it for less than the insurer’s estimate.
You can dispute your car’s insurer’s valuation with documentation of updates and maintenance records and current photos showing the car is in pristine condition. If necessary, you can hire your own qualified appraiser to inspect your car and prepare a report.
how to get a new car after a total loss accident
Insurance companies won’t replace wrecked cars with new cars and won’t pay auto loans. therefore, your ability to get a new car after your car is wrecked depends on how much your car is worth, how much you still owe, and your insurance coverage.
Once you’ve figured out your loan payoff amount and the amount the insurance company intends to pay for the loss, you can figure out how much money you’ll need to put down on your next car.
If you’re stuck owing money on a totaled car, your lender may be able to consolidate what you owe into a new car loan.
talk to a car accident attorney
You may be able to handle your own insurance claim. But if you have questions about your rights and options, talk to a car accident attorney. An attorney can answer your questions, negotiate with insurers, and represent you in court if necessary. It’s worth the expense of hiring an attorney when you don’t believe the insurer is offering you a fair settlement for your wrecked car.
Learn more about how an attorney can help you with your car accident claim. You can also connect with a lawyer directly from this page for free.