Your car insurance can cover your vehicle if it is totaled, but it depends on the policy. Read on to understand your options when you have a totaled car after an accident.

When is a Car Considered Totaled?

The term “totaled” refers to a total loss car.  Insurance companies generally declare a vehicle totaled if repair costs are more than 80 percent of the car’s actual cash value. That means if your car’s book value is $10,000, repair estimates over $8,000 will likely result in a total loss car.

Actual qualifications for determining a total loss car may vary depending on the insurance company. State regulations may also come into play. In some states, repairs costing as little as half of the car’s value makes the vehicle a total loss, while in other states, repairs are approved as long as they do not exceed 100 percent of value.

The Total Loss Car Claims Process

A totaled car has usually suffered a significant impact. In turn, the driver has likely experienced an injury. Report your claim to the insurance company as soon as possible as long as you are physically able to do so.

Schedule a vehicle inspection with the insurer’s claims adjuster. After the adjuster inspects the car, they will determine a settlement amount. Once you agree to the amount, send your car’s title to the insurer. Once the title is received and all paperwork is signed, you should receive payment for the agreed-upon amount promptly.

Determining Fair Market Value

Maybe you had an older car that was not worth much but ran very well. Unfortunately, its running condition will not usually affect its market value. It is also true that a car of the same make, model, and year may qualify for repairs after an accident, while yours does not. That is because the actual cash value (ACV) may vary depending upon the mileage and whether the car’s condition is considered excellent, good, or fair.

If you disagree with the insurance adjuster’s evaluation of your car, find a similar car in your area for sale at a greater value. To challenge the adjuster’s figures, you must have evidence that they were incorrect or didn’t consider certain factors. For example, perhaps your car was a limited edition model increasing its value or you have proof of installing substantial upgrades. Even then, however, coverage for upgrades will depend on your insurance policy.Line art - two cars in an accident - what happens when your car is totaled?

Comprehensive and Collision Insurance

If you carry comprehensive and collision insurance on your car, it should cover your repair costs, should the car be salvageable, or pay you the ACV  if it is not. Even if you do not carry comprehensive and collision coverage on your vehicle, you could still have your car repaired if you were hit by an at-fault driver depending on your policy. Again, the other driver’s insurance company will not pay for repairs if they fall within the total loss car range.

Collision insurance covers damage caused by striking another car or object. Comprehensive insurance covers vehicles where the damage doesn’t result from another automobile, but from a tree limb falling on the car, a garage fire, or any other event impacting it. If your car is in the wrong place at the wrong time, it can end up totaled even if your vehicle was not moving.

Unfortunately, if you own your car outright and don’t carry comprehensive and collision coverage–which makes sense if your car is not worth that much–and you were at fault, you will not receive any compensation.

Total Loss Car and Loans

When your car is declared a total loss vehicle and your financing agreement are almost over, you probably owe less on the car than its ACV. Under these circumstances, the insurance company will send the settlement check to your lender. The auto lender then subtracts the amount you owe. You receive the difference.

When your car loan is fairly new, expect to pay the difference between the amount you owe on the vehicle and the insurance company settlement. This occurs whenever money owed on the car exceeds its ACV.

For example, you financed a car for $15,000. Once it leaves the dealer’s premises, the vehicle begins depreciating. The car is totaled a couple of years later when its FMV is $12,000.  You still owe $13,000. The auto lender receives the insurance check. You, meanwhile, still owe the lender $1,000. The bad news is that you must still repay the loan even though the car is totaled unless you have GAP insurance.

GAP Insurance

One way to avoid the nightmare scenario of having to continue making payments on a totaled vehicle is by buying GAP insurance when you purchase or lease the car. GAP insurance, which stands for Guaranteed Asset Protection, covers the difference, or gap, if your car is totaled and you still owe money. For example, if the insurance adjuster determines the FMV of your car is $6,000, but you owe $7,000 on it, GAP insurance pays that extra $1,000.

GAP insurance doesn’t cover everything. If your car is leased and you overran the mileage, you are still responsible for the lease penalties. You don’t receive credit for extended warranties or prior loan balances. When you buy GAP insurance, always make sure you know what is and what isn’t covered, as they vary according to the policy. GAP policies generally require collision and comprehensive coverage.

If you are not sure whether you have GAP insurance on your car, check your car insurance policy. Note that you cannot buy GAP insurance after having an accident with the vehicle.

Consider buying GAP insurance if:

  • You financed for 60 months or longer
  • The down payment was under 20 percent
  • Other fees were included in the loan
  • The model depreciates fast
  • You put more miles than average on a car annually

Keeping Your Vehicle

Sometimes, the damage to the car is not that significant, but repairs cost more than the car is worth. Under some circumstances, you may arrange to keep the vehicle and have it repaired on your own dime, even though you do receive reimbursement for the car’s value.

Usually, the insurance company pays you the amount of the car’s actual cash value. It will subtract any insurance deductible owed and how much the vehicle would have gone for at the salvage yard. Keep in mind that not all insurance companies will permit you to retain your car if it is declared a totaled vehicle.

Part of the reason is related to safety purposes. A car involved in a serious collision may experience damage that is not obvious without a thorough inspection by a repair professional.

In most states, owners must obtain a new DMV title after a totaled car is repaired. The new title notes that the car is salvaged.

New Car Total Loss

You can total a new car just as easily as an old one. It probably hurts more to have a relatively new vehicle ruined than an older model, but there is some good news to report. If your new car is totaled, it is the insurance company will replace it with a new vehicle.

Many insurers provide new car replacement coverage. This coverage is good for a specific period after you buy the new car. If it is totaled within that time frame, you receive a new vehicle, not the money for a somewhat depreciated car. Remember that a new car starts going down in value the minute it is driven off of the dealer’s lot.

Ride With The General®

At The General®, we realize how hard it is when your car is declared a total loss. Not only do you have to buy another vehicle, but you probably can’t replace the car you had solely with the money you received after the accident. That makes finding cheap car insurance even more critical than ever.

For more than 50 years, The General® has provided affordable car insurance for those with checkered driving histories or less than perfect credit.

Get a free quote in 2 minutes or less by using our award-winning mobile app.  You can also use the app to report any claims. If your car is badly damaged and may even be declared a total loss, you can start your claims process via the app for prompt assistance.