Uh-oh…your car is totaled. Or is it? “Totaled” is a word that gets thrown around a lot when it comes to car accidents, but the term actually has a very specific definition. It is only used in insurance when the damage to the car falls under a particular set of circumstances set by your insurance.

It’s not the driver’s responsibility to determine if the car is totaled. That falls onto the driver’s insurance adjuster and the car insurance company. Being more informed about total losses and how insurance companies handle them can help drivers feel more prepared if their car ever suffers severe damage.

What does “totaled” mean?

So what does it actually mean, and when is a car considered “totaled?” Insurance companies typically designate vehicles as a total loss when the cost to fix the damage is more than the car’s value or if the car can’t be repaired at all for some reason or another.

When is a car considered a “total loss”?

The threshold for declaring vehicles a total loss is determined by each state, however carriers may choose to use a lower standard. Even if the repair costs are less than the vehicle’s real cash value — often a lot less — the insurance company will often total it. This is because determining the entire degree of the damage before repairs begin can be challenging.

Factors considered

Most insurance companies use various factors like market evaluation, year, make, model, mileage, and overall condition to determine the value of a car and designate a total loss. Based on those findings, the value of your vehicle will be determined.

What kind of insurance covers a totaled car?

To make sure you’re as protected as possible if your car is ever declared a total loss, you should make sure your insurance policy includes comprehensive, collision, and uninsured/underinsured motorist coverage. Here’s how each coverage helps protect you and your car:

Comprehensive coverage: This coverage helps cover a total loss that’s not a result of a collision, like if your vehicle is stolen and too damaged to repair after it’s recovered, or if your car is damaged by flood, fire, animals, and falling objects like hail or trees.

Collision coverage: This covers total losses from colliding with another vehicle or object, like a pole or another nonliving thing.

Uninsured/underinsured motorist coverage: If you’re in an accident that totals your car, the at-fault driver’s insurance is supposed to pay out the claim. If the other driver doesn’t have insurance or has insufficient coverage, you may be responsible for paying the difference. Uninsured/Underinsured Motorist coverage will cover the gap between your costs and the other driver’s ability to pay.

How much is a totaled car insurance payout?

It depends on the type of vehicle. When an insurance company declares a car totaled, it pays the vehicle’s actual cash value (ACV) at the time of the loss. Depreciation, which includes wear and tear, mileage, and previous accidents, is factored into the ACV, so the reimbursement amount will be less than what you paid for the automobile.

The settlement money from the insurance company can be used to assist you in purchasing a new automobile. However, unless your insurance policy includes new car replacement coverage, it won’t be enough to cover a new version of the same automobile you’re now driving.

What if I still owe money on my totaled car?

If you’re financing your car and still owe money, your insurance company will usually send the total loss payout to your lender. If your payout is more than you owe on the car, your insurance company will send the money to your lender to pay off your loan balance and then send you the remainder of the payout. Make sure you keep making payments on your car until everything is officially squared away or you could see a hit on your credit.

If your insurance payment isn’t enough to cover the rest of your loan, GAP coverage or Loan/Lease Payoff Coverage can help with situations where your loan balance is higher than the value of your vehicle. Here’s what those coverages are:

GAP coverage: If you owe more than what your car is worth when it’s totaled, GAP insurance covers the difference between the car’s depreciated value and what you owe on your loan. Gap coverage typically covers deductibles and pays the entire difference between the car’s ACV and loan balance.

Loan/Lease Payoff coverage: Loan/lease coverage can help offset the remaining amount due on your loan or lease if your car has been totaled in an accident or it’s been stolen. This coverage is beneficial to carry on your policy if you are currently making payments on or leasing your vehicle. Loan/lease coverage does not cover deductibles and only pays a certain percentage of the car’s ACV.

If you don’t have either of these coverages, you could be responsible for the remaining balance, whether your car is drivable or not.

Can I keep the car? What do I do with it?

You might be entitled to keep a totaled automobile, depending on the regulations in your state. According to Josh Damico, vice president of insurance operations at Jerry, a car insurance comparison service, talking to your carrier about acquiring the totaled vehicle back is the best way to start this process. If you want to buy the automobile back, you’ll need to contact your local DMV to find out what documents you’ll need to fill out and how to get started.

You won’t be able to drive the car straight away if you’re allowed to keep it. “Once a car is judged a total loss, it must be fixed, pass inspection, and you will eventually be issued a rebuilt or salvaged title,” Damico explained. You’ll need to supply the title as well as evidence of your identity. If you don’t intend to drive your totaled car, you might be allowed to:

  • Keep it and utilize the pieces on another automobile or sell them for profit.
  • Sell it to a salvage yard or a junkyard.
  • Make a donation to a local charity.

What to do if your car is totaled in an accident

As soon as your vehicle is damaged, whether from an accident or another incident, contact your insurance company ASAP (even if you aren’t at fault!) If you’re an Elephant customer, you can call us or file a claim here. Once your claim is received, a representative will follow up with you about the next steps. If another driver is at fault, you’ll need to file a property damage claim with their insurance to get reimbursed for your loss.

After you file a claim you should take the following steps:

Examine the damage: An adjuster will be dispatched by your insurance carrier to inspect the damage to your vehicle. To determine the cost of repairs, the adjuster will undertake a visual evaluation.

Make contact with your lender (if applicable): Your vehicle is what secures your financing if you have a loan or lease. As a result, you must notify the financing firm of the harm – and you must do so immediately.

Negotiate with the insurance company about the claim: You can negotiate the payout if you believe the insurance company’s appraisal of your car’s ACV is too low. However, you’ll have to prove that your car is worth more than the insurer is willing to pay.

Purchase a new vehicle: The settlement you receive from the carrier is unlikely to be sufficient to purchase a new model of your old car. However, you can use it to put a down payment on a new car.

Totaling your car is scary, but the right insurance company and coverages can make the process as hassle-free as possible. Make sure you’re covered if you ever total your car by getting a quote today. Not sure where to start? We can help. Find out if Elephant offers coverage in your area and get a quote from us in no time. Feeling more confident on the road is just a few clicks away.

Article last updated on July 1st, 2024 at 3:42 pm