Each year millions of Americans are involved in car accidents. In 2020 alone, according to the National Highway Traffic Safety Administration (NHTSA), there were over 5.2 million police-reported car crashes.
Many of the millions of cars involved in accidents each year are seriously damaged—so damaged that insurance adjusters decide they are a “total loss” (totaled).
Here’s what you need to know if your car is totaled:
- A car is a “total loss” when it isn’t worth the cost to fix it.
- Insurance adjusters decide whether to total a car.
- Insurers will typically offer to pay the actual cash value (ACV) of your totaled car.
- If you disagree with the insurer’s offer, you can dispute it.
- You might be able to keep, sell, or donate your totaled car, but it’ll cost you.
- If your totaled car is financed, you still have to repay your car loan in full.
- Gap insurance can help cover the difference between your car’s ACV on the day of your accident and how much you still owe on your car loan.
What Is a “Totaled” Car?
A total loss car is a car that can’t be repaired safely or that an adjuster decides will cost more to fix than the car is worth.
Who Decides If My Car Is a Total Loss?
Insurers decide whether your car is a total loss. After you file a claim, an adjuster will inspect the damage to your car and figure out your car’s actual cash value (ACV).
A car’s ACV is the market value of the car on the day of the accident—not what you paid for it and not what you owe on your car loan. You can estimate your car’s ACV by using tools like Kelley Blue Book or by looking at the sale price of cars of a similar make, model, model year, and condition in your area.
How Do I Know If My Car Is Totaled?
Most states have total loss guidelines that insurers must follow. Some states use a total loss formula (TLF), and other states set a total loss threshold.
In states that use a TLF, adjusters add the cost of repairs and the scrap value of the car. If these two numbers equal or exceed your car’s actual cash before the accident, then the insurer will total your car.
For example, let’s say your car’s ACV on the day of the accident is $20,000. The salvage value after the accident is $4,000. If a mechanic says it’ll cost $16,000 or more to repair your car, an insurer will total it. If your car will cost less than $16,000 to fix, an insurer will likely reimburse you for repairs.
States that use the threshold method require insurers to total a car when the cost to repair it is more than a set percentage of the car's ACV. For example, over a dozen states have laws that require insurers to total a car when the cost to repair it is more than 75% of the car’s ACV. Thresholds vary from as high as 100% to as low as 50% in other states.
Let’s say, again, that your car’s ACV on the day of the accident is $20,000. You live in a state with a total loss threshold of 75%. If your car will cost more than $15,000 to fix, an insurer will total it. If you can repair it for less than $15,000, your insurer will likely reimburse you for repairs.
What Are My Options When My Car Is Totaled?
After an insurer says your car is totaled, you have a few options. The option that is best for you depends on many factors, including your financial situation, insurance coverage, timeline, and knowledge about cars.
Accept the Insurance Company’s Offer
The easiest option is to accept the insurer’s car accident settlement offer. If you do, the insurer will typically pay you the actual cash value of your car in exchange for the title. If you own the car outright, the payment will go to you. If your car is financed, the payment will go to your lender. If you owe your lender less than your car’s ACV, you keep the balance of the payment. If you owe your lender more than your car’s ACV, you still have to pay the balance of your loan.
Try to Negotiate a Better Settlement
If you don’t agree with an adjuster’s estimate for repairs, you can negotiate. Get your own written estimate for repairs and compare it to the adjuster’s estimate. Make sure both estimates are from qualified repair shops. You might be able to use your estimate to convince the insurer not to total your car and to reimburse you for repairs instead or vice versa.
Even if you and the adjuster agree your car should be totaled, you might disagree about your car’s actual cash value. Do your own research. Check Kelly Blue Book. The Blue Book value is a good starting point, but it shouldn’t be the last word. Look at the advertised sale price of similar cars in your area. Provide the adjuster with evidence of the condition of your car, including recent photos of the body, mechanical records, and receipts for upgrades like new tires or speakers. You might even want to hire your own appraiser if you have serious doubts about the insurer’s valuation.
Fix the Car Yourself
If you don’t want to sign your title over to the insurer, you can probably keep your car and try to fix it yourself. Most states allow owners to keep totaled cars. The insurance company will deduct the salvage value of the car from your settlement. If the car is financed, your lender might have a say in whether you can keep the totaled car.
Just because you can keep a totaled car doesn’t mean you should. Repairs might be more expensive than you think or you might not be able to get the car safely back on the road at all. You’ll probably have to get a salvage title for the car—an official record that an insurance company has said it’s a total loss—and salvage title cars are hard to register, insure, and sell.
Sell, Salvage, or Trade-In the Totaled Car
You might agree that your car is totaled, but prefer to put it on the market yourself. If you decide to go this route, the insurer will let you keep the car and deduct the salvage value from your settlement. You can then sell it for parts, sell it to a salvage yard yourself, or see if a car dealer will accept it as a trade-in.
Donate the Car
Some organizations will accept your totaled car as a charitable donation. You can reach out to your favorite charity to see if they work with a car donation service or donate to a national organization like Make-A-Wish or Goodwill. You can support a worthy cause and potentially get a tax break.
What Steps Should I Take After My Car Is Totaled?
Getting in a car accident serious enough to total your car is stressful. You might be injured and you’ll definitely be without a ride for some amount of time. Here’s what you can do to make the total loss claim process go as smoothly as possible for you.
File an insurance claim as soon as possible. You should contact your own insurer and the insurer of anyone else potentially legally responsible (liable) for the accident right away.
Assess the damage. Get a written estimate of how much it’ll cost to repair your car. Set up a time to have the adjuster inspect your car too.
Research your car’s actual cash value. Figure out the market value of your car by doing some comparison shopping and using online valuation tools.
Find your title. You’ll need the documents proving that you own your car. You’ll likely transfer the title to the insurer.
Contact your lender. If your car is financed, you need to let your lender know about the damage to your car and continue to make loan payments. When the insurer settles your claim, they’ll send payment to your lender.
Negotiate with the insurer. If you disagree with the insurer’s repair estimate or valuation of your car, negotiate for a better settlement with evidence to support your position. If negotiations stall, you might want to talk to a lawyer.
Finalize Settlement. Once you’ve reached an agreement, you’ll sign some paperwork. In most cases, you’ll release your car to the insurance company and they will send you (or your lender) a digital payment or check for the settlement amount.
Who Pays for a Totaled Car?
The type of insurance coverage that kicks in to pay for a totaled car depends on the circumstances of the accident.
Liability Insurance
In most states, the driver who is at fault for an accident pays for accident-related losses and expenses. If your car is totaled in an accident that isn’t your fault, you can file a claim against the at-fault driver’s liability insurance (called a third-party claim).
Collision and Comprehensive Insurance
Even if you are at fault for an accident, you may be able to get compensation for your totaled car if you have collision coverage in your insurance policy. Collision coverage covers accident-related damage to your car, regardless of fault.
Comprehensive coverage pays for non-collision-related damage caused by things like severe weather, fire, and falling tree branches.
Uninsured
If an underinsured or uninsured driver totals your car, you can make an uninsured motorist claim, if you have the coverage.
If you are uninsured and your car is totaled, your options for compensation are limited. If you aren’t at fault for the accident, you can make a claim against the at-fault driver’s liability insurance, but your recovery might be limited if you live in a state with a “No Pay, No Play” law. If you're at fault for the accident, you’ll have to pay out of pocket to replace your totaled car and you’ll have to pay for other people’s injuries and property damage.
How Much Will Insurance Pay for My Totaled Car?
An insurer (yours or the at-fault driver’s) will pay you (or your lender) the actual cash value of your car. Your car’s ACV at the time of the accident will likely be less than what you paid for it—maybe even substantially less—because of depreciation. If you disagree with the insurer’s valuation, you can negotiate for a better offer.
The timeline for settling your car accident claim varies from a few weeks to many months. The timing turns on how quickly you file your claim and the laws in your state. Your own collision coverage is likely to settle with you more quickly because collision coverage pays regardless of fault. A third-party claim is only paid if the other driver is at fault and that often takes time to figure out.
What If I Still Owe Money on a Totaled Car?
If you total a financed car, an insurer will pay the actual cash value of the car only. Your car’s ACV might be more or less than what you owe on your loan.
The insurance payment will go to your lender first. If the payment is more than what you owe the lender, you'll receive the rest. If the payment is less than what you owe, you'll be responsible for paying the balance of your loan.
Most insurance companies offer “gap” coverage to protect you from this financial risk. Gap insurance covers the difference between your car’s ACV and the amount you owe on your car loan.
Learn more about gap insurance and how to decide whether you need it.
How To Get a New Car After a Total Loss Accident
Your budget for a new car will likely depend on your insurance settlement. If you own your car, you can purchase a new car with your insurance settlement. For example, say your totaled car’s ACV is $15,000 and you own the car outright. You can buy a similar car for $15,000 or use the $15,000 as a down payment on a newer car.
Car shopping is more complicated when you total a financed car. Remember, insurers won’t pay off your entire car loan balance. Instead, an insurer will pay your lender the actual cash value of your car. If your car’s ACV is more than your loan balance, you can use the difference to shop for a new car. Let’s say your car’s ACV is $12,000. You still owe $6,000 on your loan when your car is totaled. The insurer will pay your lender $6,000 and you’ll get the remaining $6,000.
If you owe more than your car’s ACV, you’ll have to pay the balance of the loan. Let’s say your car’s ACV is $10,000. You still owe $12,000 on your loan. If you total your car, the insurer will pay your lender $10,000. You’ll be responsible for paying the remaining $2,000 out of pocket or with gap coverage.
In this situation, you’ll have to pay for a new car with your savings. A car dealer might be willing to roll your $2,000 balance into a loan for a new car, but beware—you’ll immediately be financing more than the car is worth and you could end up right back in the same situation if you total your new car.
Talk to a Car Accident Attorney
You might be able to handle a straightforward total loss claim on your own. But if your accident involves injuries or if you want to challenge the insurer's repair estimate or valuation of your car, talk to a lawyer.
A knowledgeable car accident lawyer can walk you through the total loss process, answer your questions, and negotiate for the best outcome. Learn more about what a car accident lawyer can do for you. You can also connect with a lawyer directly from this page for free.