Car insurance companies declare your car a total loss when it is so damaged that the cost to repair it is higher than the cost to replace it.
Your car can be totaled in an accident caused by another driver, or it can be totaled if you crash it into someone or something, or if it’s stolen or damaged in a fire, flood, or another kind of incident. The specifics of the damage may affect how your totaled car is covered by car insurance.
What does it mean when a car is totaled?
You might hear the phrase “totaled” used to describe any car that’s been damaged in an accident, but a total loss actually has a specific meaning when it comes to car insurance.
When your car is totaled that means it is either too expensive to repair (or it is damaged beyond the point of repair) and your car insurance company will pay you the actual cash value (ACV) of your car.
Assuming you own your car, you’ll get a check from your insurance company, and you can decide whether to put it towards a new car or not. But if you lease or finance your car, the insurance check for your totaled car might go to your lessor or lender instead.
How is a totaled car covered by insurance?
Car insurance policies are made up of multiple types of coverage, and different kinds of damage are covered by different parts of a policy. A total loss could be covered under a couple of different types of insurance.
Collision coverage: Covers damage to your car after an accident no matter who was at fault. Collision coverage would pay for a total loss claim, minus your deductible amount.
Comprehensive coverage: Covers damage to your car that happens when it’s not being driven, like damage from fire, flood, hail, falling objects, vandalism, or theft. If your car is declared a total loss from one of these perils, your comprehensive insurance would pay your claim, minus your deductible amount.
Uninsured/underinsured motorist coverage: If the other driver was at fault but doesn’t have car insurance (or doesn’t have enough to cover the damage), you may be able to file a claim under your uninsured motorist property damage coverage. This is different from uninsured motorist bodily injury coverage and isn’t available in every state, so check your declarations page to see if you have this coverage included on your policy.
If you drive a leased or financed car, you may have been required to add full coverage (meaning comprehensive and collision coverage) to your policy. If you don’t have a full coverage policy and you were at fault for the accident, your insurance likely won’t cover the cost of a total loss.
If the other driver was at fault for the accident, you may be able to file a total loss claim with their insurance company or, if they don’t have enough insurance coverage, with your collision coverage or uninsured motorist policy.
How does the insurance company know my car is totaled?
A car will usually be determined to be a total loss if it would cost more to fix than the vehicle is worth, but some states may have regulations that require a car to be declared a total loss if the costs of the damage are above a certain percentage of its value.
For example, in Maryland, the total-loss threshold is 75%, which means that if the price of repairing the damaged car is more than 75% of its market value, the car is considered a total loss.
When you file a claim with your car insurance company, you’ll be assigned a claims adjuster. Your claims adjuster is your point of contact with your insurance company as you move through the claims process, and they, and your insurance provider, will establish whether the vehicle is actually a total loss.
→ Learn more about how total loss is calculated
What will insurance pay for a totaled car?
In a total loss claim your insurance will pay you the actual cash value (ACV) of your car, minus any deductible. The ACV is essentially the market value of your car before it was totaled, and it’s usually less than whatever you paid to purchase the car, because it takes into account usage and wear and tear.
For instance, if you purchased your car for $20,000, but you’ve been driving it for four years, your insurance company might calculate the ACV to be $13,000.
There are some coverages, like gap insurance and new car replacement coverage, that can increase your claim payment beyond the ACV of your car.
For example, gap insurance will pay the difference between the value of your car and what you owe on your car loan so you aren’t stuck making payments on a car that doesn’t exist anymore.
How is ACV calculated?
Most car insurance companies use an industry formula to come up with your car’s ACV. It takes into account factors like how long you’ve had your car, its make and model and how many miles it has on it in order to gauge how much your car has depreciated in value since you bought it.
What is new car replacement coverage?
Many big car insurance companies, including Allstate, MetLife, Farmers, Nationwide, and Travelers, offer new car replacement coverage, which will pay you the cost of replacing a totaled car with another of the same make and model.
Insurance company | Is new car replacement available? | |
Yes | ||
No | ||
Yes | ||
Yes | ||
No | ||
No | ||
Yes |
New car replacement coverage is optional, so no drivers technically need it. It’s also, in most cases, only available for the first year or two after you purchase a brand new car.
It can be a pricey add-on to your coverage, but if you want assurance that your car insurance provider will pay enough to fully replace your car in the event of a total loss, adding new car replacement coverage to your policy is one way to do it.
What happens if your car is totaled and it isn’t your fault?
If you are in an accident and the other driver is at fault, their liability insurance would pay for damage to your car. If your car was totaled, their liability coverage would pay you the ACV of your car.
But not every driver has car insurance, and some drivers only have a small amount of coverage. What happens if someone who only has $10,000 in property damage liability insurance totals your $20,000 car?
File a claim through your collision coverage
Your collision coverage will pay for damage to your car whether or not you were at fault, so drivers who have collision coverage can file a claim with their own insurance company.
If you file a claim through your collision when someone else is at fault, your insurance company will pay your claim and take the other driver’s insurance company to court to recoup their cost through a process known as subrogation.
File a claim through your uninsured motorist coverage
Uninsured motorist coverage is designed to pay for your medical expenses if you are hit by an uninsured or underinsured driver, but some uninsured motorist policies also offer coverage for property damage.
This means drivers who have uninsured motorist property damage coverage (UMPD) can file a claim through their UMPD coverage to pay for a totaled vehicle if they are hit by a driver who doesn’t have enough liability coverage.
→ Learn more about what happens when an at-fault party doesn’t have enough insurance?
What happens when you total a car that is financed?
If you financed a car, that means you borrowed money from a lender to purchase your car. Until you fully pay back your loan, your lienholder has a financial stake in your vehicle (meaning they also own it).
If you total a car that you’re still making payments on, the ACV payment from your car insurance company will typically have to go to your lender to pay off the remainder of your car loan.
What happens if the insurance payment isn’t enough to pay off your loan?
If you total your car but the check you got from your insurance company isn’t enough to fully pay off your loan, there’s a chance you could wind up making car loan payments on a car that doesn’t even exist anymore. That’s what gap insurance is for.
Gap insurance is a type of coverage you can add to your policy that will cover the difference between what your insurer will pay out on a total loss and what you still owe, so you aren’t left underwater on your car loan. Your lienholder may require you to add gap insurance to your coverage, but even if they don’t, it can be a smart buy if you’re still paying off a car.
Frequently asked questions
Do insurance companies make money on totaled cars?
Insurance companies salvage total cars, which means selling them for scrap. The money they make on salvaging your totaled car is included in your claim payout.
Is my car totaled if the airbags deploy?
Not necessarily. Airbag deployment won’t total your car unless your car’s value is low and the cost of replacing the airbags is more than it would cost to replace your car.
How do you negotiate a total loss payout?
To negotiate a total loss payout you need to know the value of your car. Then you’ll know if the insurance company’s offer is appropriate. If you think the offer should be higher, you can negotiate with the insurance company (or hire an attorney to do it for you) for a more appropriate payout.
Do you pay a deductible when your car is totaled?
If someone else is at fault for the accident you won’t pay a deductible. However, if you are at fault for the accident (or the accident wasn’t anyone’s fault, like if your car is flooded in a hurricane) your collision or comprehensive coverage would pay for the claim, which means you would be responsible for any deductible you have under those coverages.
