What Happens When Your Car Is Totaled?

February 22, 2021

The last thing you want to hear after an emotionally taxing car wreck is that your vehicle has been totaled, leaving you without transportation — one of life’s basic necessities. But what does “totaled” actually mean, and how do you know what to do when your car is totaled? Does your insurance provide any coverage?

If you’ve just been in a crash, you probably have a lot of questions. We’ll do our best to give you the answers you need during such a stressful event.

What It Means When Your Car Is Totaled

A totaled vehicle is simply a vehicle that is either unfixable or would require repairs that cost more than the vehicle is currently worth. Just because your car has been severely damaged doesn’t necessarily mean it’s totaled. Your vehicle could require extensive repairs and still not be a total loss.

Some states have their own threshold rules for totaled cars. For example, in the state of Oregon, your car is considered totaled if the damage incurred is more than 80% of the vehicle’s cash value. According to this rule, a car worth $7,000 would be considered a total loss with any repair estimate over $5,600. The term “total loss” is what insurance companies use to describe when your repairs cost more than your vehicle’s value. Your insurance company will usually complete an inspection before declaring your car a total loss.

Insurance Coverage for Totaled Vehicles

Collision and Comprehensive Coverage

When you take out a car loan or lease a vehicle, you’re usually required to have two types of insurance coverage: collision and comprehensive.

• Collision coverage covers the damage to your car when you collide with an object or another car. It pays for the value of your vehicle after the deductible is paid, no matter who was at fault.
• Comprehensive coverage is just what it sounds like — it covers all other damages beyond your control that don’t fall under collision coverage (weather conditions, animal collisions, fires, etc). It pays for the value of the vehicle after the deductible is paid.

These coverages aren’t necessary for a car that’s paid off, but without it, you would have to pay for a replacement for the totaled vehicle. That’s why it’s wise to have coverage regardless. As long as you carry these coverages, you’ll likely be covered if your car is totaled.

What Happens When Insurance Totals Your Car

The fault of the accident plays a large part in what happens with your insurance company. If the accident was determined to be the other driver’s fault, their insurance company will pay out the value of your car through the liability coverage that most states require drivers to have. When the driver who hit you doesn’t have insurance, your collision and/or comprehensive policy coverage may cover your totaled vehicle.

On the other hand, if you caused the accident and now have repairs that exceed the value of the car or the car is irreparable, the insurance company will pay off the vehicle after you’ve paid the deductible (if necessary) — but this is largely dependent upon your policy. The insurance company will determine the value of your totaled vehicle based on mileage, age, make and model, overall condition, salvage value, unseen damage, and demand for your car in local markets.

There is no guarantee, however, that your insurance will cover your totaled vehicle. Circumstances that can lead to a denied claim include:

• A DUI
• A fraudulent claim
• Failure to pay your insurance premiums
• A lack of the proper insurance coverage for your situation
• Waiting too long to file a claim with the insurance company

When Insurance Doesn’t Pay Off Your Auto Loan

If your insurance doesn’t cover the full pay-off amount on your loan, that’s where gap insurance comes in. Gap insurance is an insurance add-on that covers a certain percentage of the difference (or gap) between your vehicle’s worth and what you still owe on it. If you purchased gap insurance for your new car, it will save you from unnecessary financial hardship.

Say, for example, you just purchased a new vehicle that has a cash value of $30,000, but you still owe $33,500 on your auto loan after a crash. Gap insurance would take care of the $3,500 leftover that the insurance company wouldn’t pay out on.

When You or the At-Fault Driver Has No Insurance

But what happens when a car is totaled and you don’t have any insurance? Remember that in most states, uninsured driving is illegal. If you get in an accident without it, you could be responsible for 100% of your expenses and still have to pay off the loan if you’re financing the vehicle.

In some cases, you may be able to take advantage of uninsured/underinsured motorist property damage (UMPD), which is a coverage included in some insurance policies that protects you against the vehicle damage caused by a person with limited to no liability coverage. If you don’t have collision coverage, UMPD coverage will cover up to a certain amount, as determined by the policy — but it often won’t be enough to cover all of your expenses. Also, keep in mind that a deductible may apply. It’s wise to have collision coverage if your vehicle has a high value that exceeds your UMPD coverage.

How to File an Insurance Claim for a Totaled Vehicle

If your vehicle has been totaled in an accident, the first thing to do is contact your insurance company, if the accident was your fault, or the insurance company of the party at fault. They will put you in touch with an insurance adjuster who will decide if your car is totaled or repairable. This person will come out to conduct an inspection of the vehicle and determine a settlement figure. The amount will be based on the cash value of the totaled car, minus your collision or comprehensive insurance deductible, if you were at fault.