So, you’ve been in an accident and you're starting to think your car is totaled. The entire process from filing a claim to replacing your vehicle can feel overwhelming, but don’t worry. This step-by-step guide can help you navigate the various parts of auto insurance claims and payouts that can reduce the anxiety and frustration of an unfortunate situation.
When is a car considered totaled?
One of the most important questions when a vehicle is significantly damaged is how does a driver know if it's completely totaled? The term “totaled” comes from the insurance term “total loss,” referring to when the cost of a car’s repair is more than it’s worth.
An insurance adjuster will inspect your car to determine if it’s a total loss. They’ll evaluate the extent of the damage and compare repair costs against the car’s value. If the repair costs exceed a certain percentage of the vehicle’s actual cash value (ACV), the car may be considered totaled.
What should I do if I think my car is totaled?
If something happens to your car and you’re physically okay, you’ll want to contact your insurance company. In a situation where your car is totaled from a collision and you have collision coverage, your insurance company may help you offset some of the replacement costs.
The sooner you report the accident, the faster your claim process will start. Provide your insurance adjuster with details about the accident and your vehicle’s condition. You’ll need to have your policy number handy and any basic information about the accident you can provide.
Gather all relevant information and documentation for your insurance company, typically including:
- Accident report: A police report if one was filed.
- Photos: Pictures of the damage to your car, the scene of the accident, and any other relevant images.
- Relevant info: Date, time, place, car model, and names of individuals involved may be needed to complete a claim. You might also need to submit lienholder information or locate your vehicle’s title.
The more information you provide, the smoother the process can go.
After you finish giving an adjuster the needed claim information and your car is declared totaled, you’ll need to decide on what to do with it. If your car is drivable, you might be able to keep it until the insurance adjuster assesses the damage. If it’s not, your insurer will usually arrange for it to be towed to an approved facility.
How do insurance companies determine a total loss?
Most insurance companies use a formula where the cost of repairs must exceed a certain percentage of the car’s pre-accident value to determine a total loss. An adjuster will look at the structure, condition, and make of your car, then assess any state laws that need to be attributed.
Different states have different measures for a car’s total loss. Certain states have blanket statements to define a total loss, like when the repair value is higher than the car’s value. Other states use the cash value plus a percentage for a salvage value to determine a loss.
For example, in Arkansas a total loss is determined when the cost of car repairs plus the salvage value is at least 70% of the car’s actual cash value. Let’s say the vehicle’s cash value is $10,000 and repairs would cost $7,000, it would be declared a total loss in Arkansas.
What are common scenarios that can lead to a car being totaled?
Some typical scenarios where your car would be totaled include severe structural damage or internal damage like to the engine or transmission. These incidents can occur from freak collisions or driving accidents, weather damage like from a hurricane or tornado, or severe vandalism. Even less severe accidents like a rear-end collision can total a car if the model is older or has suffered previous damage.
What if the car is totaled but still drivable? Can I keep it?
If your car is drivable but declared totaled, you might have the option to keep it. This is known as retaining the salvage. However, you’ll need to understand the implications:
- Salvage title: Depending on your state laws, you may receive a salvage title from your insurance company, which can affect its resale value and insurability.
- Insurance and registration: You might face restrictions on insuring or registering a vehicle with a salvage title, depending on your state’s laws.
How much will my insurance company pay for a totaled car?
The adjuster has determined that your car is totaled, so now it’s time to figure out how much your insurance company can pay you for the damages. Totaled car insurance payouts are generally based on the Actual Cash Value (ACV) of the vehicle, not the replacement cost. ACV is the vehicle’s market value before the accident, minus depreciation. This value will be determined by many factors, including the make, model, mileage, and year of your car.
For example, if your car's ACV is $12,000, that’s what your insurer may pay you minus any deductible.
What if the totaled car is financed?
If your car is leased or financed, the insurance company will first pay the lienholder. A lienholder is just a fancy word for the party that’s holding your loan before you can pay it in full. Usually, the lienholder is whoever issued you a loan, like a bank or credit union. If there’s payout money remaining after your car’s lease is fully paid, the rest will be sent to you.
To get around a scenario where your totaled car payout doesn't cover your loan, you should apply for gap coverage. Gap insurance may help you cover the difference between your car’s ACV and what you owe on it, in the event of a total loss. For example, if your car’s value is $12,000 but you owe $15,000, gap insurance may cover the $3,000 difference.
If you own your car outright and have already paid off your loan, the insurance payout will be sent directly to you. You can use these funds to purchase a new vehicle or for other expenses.
What if my car is totaled and I only have liability insurance?
Liability insurance only covers damage to other people’s property and injuries, not your own vehicle’s damage. If you only have liability coverage and your car is totaled you won’t receive any payout from your insurer for your vehicle.
For a total loss situation, comprehensive insurance or collision coverage can help. If your car is totaled due to a collision with another vehicle or object, collision coverage may help pay for the vehicle’s cash value minus the deductible.
If your car is severely damaged due to a force-of-nature accident like a fire or hurricane, comprehensive coverage may provide a payout for your car’s value. Comprehensive coverage can also help in a situation where your car is stolen but returned with extreme damages.
Should I cancel my car insurance after a total loss?
Even if your car is totaled, you should not immediately cancel your car insurance. Especially if you’re planning to purchase a new vehicle, cancelling your policy may not be your first choice of action. In specific situations, keeping the policy active may also help you get coverage when driving someone else’s vehicle in the meantime. Having a full coverage policy may cover you when driving your friend or parent’s vehicle while yours is being repaired or replaced.
Instead, when the settlement is completed, you should make sure to remove your totaled vehicle from the policy. If you have other vehicles on your policy, you’ll need to update your coverage.
Will my insurance premiums go up if my car is a total loss?
Whether your premiums will increase depends on several factors, including who was at fault in the accident and if people were hurt in the process. If you were not at fault, your rates might not change at all.
However, if you were at fault, your rates could increase as part of your insurer’s assessment. The rate increase percentage will vary from state to state, with certain states like California experiencing up to 97% premium increases for accidents that also cause injuries.
Who should I contact about total loss questions?
If you need help filing a claim or have specific questions about the process, contact your insurance provider directly. Infinity Insurance Agency, Inc. can help guide you the right insurance adjuster with your carrier who can help you through each step of the process to ensure you understand the complexities of a total loss occurrence.
Dealing with a totaled car can be stressful but getting familiar with insurance terms and what to do in an accident can make the process smoother.
Call IIA today for any questions about your current coverage or get a free quote at 1-855-478-3705.