What to Do If Your Car Is Totaled

Did you get into an accident? Your car might be a total loss. Here's what to do next if your insurer declares your car to be totaled.
Wrecked car on tow truck

Were you in an accident? There’s bound to be some damage. But sometimes the damages can be so bad that your insurer will label your car a total loss. A total loss means that it would cost more to repair your car back to a drivable condition than it’s worth.

Having a totaled car can cause a new group of problems for you. Your insurer will only pay you the actual cash value (ACV) of the car. This means you could be on the hook for any outstanding loans. It might also be hard to replace the car with the payout you’d receive from the insurance company. Unfortunately, the alternative of keeping the car may also be expensive and stressful because you’d have to repair it to roadworthy condition.

In this article, you’ll learn the fundamentals of what happens if an accident totals your car. This will include how insurance companies handle it and define a totaled car. We’ll also break down the next steps after a wreck totals your vehicle. This way you can figure out the best course of action.

How To Know If Your Car Is a Total Loss

Your car may have a lot of damage after an accident, but did it get totaled? It’s not easy to tell just by looking at it. Your insurance company will usually be the one to tell you whether your car is a total loss or not.

Your Insurer Will Assess the Car’s Condition and Value

Insurers will declare a car a total loss if the damage costs exceed its actual cash value. Your insurer will have a claims adjuster evaluate the damages to your car. They’ll be able to determine how much the total costs of repairs will be by running your car through a vendor database.

Another factor that your insurer will consider is your car’s “salvage value”. The salvage value is the approximate resale value of spare parts and metal from your car. Insurance providers typically add up your car’s total repair costs and salvage value. Your car is a total loss if the sum of the repair costs and salvage value is more than your car’s actual cash value.

Keep in mind that your car has been depreciating since you drove it off the lot. Cars depreciate by about 20% the first year. They’ll then depreciate by about 10% in each following year. The yearly percentages above are just estimations based on previous data. The exact depreciation amount depends on how much use your car will see over the years.

Your Insurer Will Consider State Laws

Each state has its own set of guidelines that insurance providers must follow to declare your car a total loss. For example, many states consider a car a total loss if the damages reach a certain percentage of the car’s value.

Other states use the “total loss formula (TLF)” to determine whether or not a car your car is a total loss. With the TLF, your car is a total loss if the salvage value and repairs cost more than its cash value. States will only use the TLF if their law doesn’t indicate a specific percentage for the threshold.

Below is a table of each state’s total loss threshold by percentage:

StateTotal Loss Threshold
Alabama75%
AlaskaTLF
ArizonaTLF
Arkansas70%
CaliforniaTLF
Colorado100%
ConnecticutTLF
DelawareTLF
Florida80%
GeorgiaTLF
HawaiiTLF
IdahoTLF
IllinoisTLF
Indiana70%
Iowa50%
Kansas75%
Kentucky75%
Louisiana75%
MaineTLF
Maryland75%
MassachusettsTLF
MichiganTLF
Minnesota80%
MississippiTLF
Missouri80%
MontanaTLF
Nebraska75%
Nevada65%
New Hampshire75%
New JerseyTLF
New MexicoTLF
New York75%
North Carolina75%
North Dakota75%
OhioTLF
Oklahoma60%
Oregon80%
PennsylvaniaTLF
Puerto RicoTLF
Rhode IslandTLF
South Carolina75%
South DakotaTLF
Tennessee75%
Texas100%
UtahTLF
VermontTLF
Virginia75%
WashingtonTLF
Washington DC75%
West Virginia75%
Wisconsin70%
Wyoming75%
Note: the thresholds above come from each state’s current and official laws on salvage vehicles and total losses.

What Happens After Your Car is a Total Loss?

After your insurer labels your car a total loss, there will be some steps you’ll want to take. The first thing is that you’ll need to figure out what to do with your car. You can either keep it or get rid of it. Either option has its pros and cons.

Below are explanations for each option you have after your provider declares your car as a total loss:

Keep the Car and Restore It

You might choose to keep your car if it’s a total loss. If you do, your insurer will issue you a partial payout that isn’t the same as your car’s cash value. People who do this usually want to restore it to a drivable condition. When an accident totals your car, it receives a salvage title. You can’t legally drive a salvage title car until you get a rebuilt title from your state.

Choosing to keep your car could end up costing you big money in the long run. The repairs to get your car back to a roadworthy state would likely be very expensive. It’ll also be hard to find auto insurance for your rebuilt title car. Rebuilt title insurance is often far more expensive than regular coverage.

Sell It as a Salvage Title

Another option is to keep the car and then sell it as a salvage title car. Some people want to buy these types of cars because they’re inexpensive and they think they can repair it back to a drivable condition. Keep in mind that if you do this, you’ll have to disclose the fact that your car has a salvage title.

Accept the Full Payout

The most common option when your car’s a total loss is to just take the full payout and get a new car. Your insurer will simply pay you the equivalent of your car’s actual cash value.

This is an easy option if you’ve paid off your car. If you haven’t, you’ll still owe money on your previous car. Gap insurance comes in handy here because it will cover the difference between your car’s cash value and the rest of your loan.

What If You Total a Lease or Rental Car?

Things get a bit more complicated if your car is a rental or lease. This is because you don’t own the vehicle and you might owe money. Your insurance should be able to help you out if you total a lease or rental car.

Your insurance will pay you for the current fair value of the car if you’re leasing it. Paying the rest of the lease is up to you. Gap insurance would help you pay for the rest of the lease. It pays the difference between the car’s current value and the balance that you owe.

The same goes for rental cars. Your insurance company will pay for the current value of the car. You’ll still be on the hook for the rest of the rental costs.

What If You Aren’t At-Fault?

The accident that totals your car might not be your fault. In this case, the other party’s insurance will need to pay for the damages that you or your car suffer. This includes paying you out for the actual cash value of your car. Usually, you’ll need to be the one to file a claim against the other person’s insurance.

Remember that the insurer won’t be able to replace your car. They only have to pay you for the fair market value. Like if you were the one at fault, your car will receive a salvage title and the rest will be up to you. The only difference if you’re not at fault is that the other party and their insurer will have to cover the costs.

If a falling tree or other random event destroys your car, your comprehensive insurance will help you. Just like in the other cases, your insurance will pay you for the actual cash value.

Frequently Asked Questions

Q: Can I legally drive a totaled car?

A:  Not exactly. You can’t legally drive a previously totaled car if it has a salvage title. You can only drive it if you or the previous owner restore it to a drivable condition. Each state has a set of requirements on what constitutes a roadworthy condition for a car.

Q: Can I fight a total loss?

A: There are ways that you can dispute a total loss claim. You don’t have to go along with the appraisal of your car’s value that your insurer gives you. You are free to get different opinions on the car’s value. This usually involves hiring your own appraiser and having them objectively inspect your car’s condition to determine the value.

Q: What is a total loss settlement?

A: A total loss settlement is a payout that you’ll receive after an accident totals your car. Your insurance company will appraise the value of your car (though you can get another opinion) and will pay you accordingly. Opting to keep your car will likely leave you with a partial payout instead of a full one.

Q: Do dealerships buy totaled cars?

A: Dealerships often buy salvage title cars for cash.  They may want to re-sell it or use it for parts. This is a good option if you want to quickly dump your car for quick cash. You may also look into selling the car to a private party. Remember that you must disclose the fact that it’s a salvage title car.

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