What to do when your car is totaled by your insurance company

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You’ve been in an accident and your car has serious damage. The body shop says it might not be worth fixing — but the final call usually isn’t yours to make. In most cases, your insurance company decides whether to repair or “total” your vehicle, based on its value and the cost of repairs.

If that happens, you’ll go through what’s known as a total loss claim. Understanding how it works — and what your rights are — can help you avoid surprises when the settlement check arrives.

What total loss means in auto insurance

A car is considered a total loss when the cost to repair it is close to or higher than what it’s worth. Each state and insurer sets its own rules, but the general formula is the same:

For example, a 15-year-old sedan with $4,000 worth of body damage might be totaled because it’s only worth $3,500. But a newer SUV with the same damage could easily be repaired because its pre-accident value is much higher.

When your car is declared a total loss, the insurance company pays you its actual cash value (ACV) — what it was worth just before the crash — minus your deductible. The car is then sent to a salvage yard, where it’s sold for parts or auctioned off. The insurer keeps the salvage proceeds.

How state laws affect total loss decisions

Whether your car gets totaled can depend on where you live. Many states set a total loss threshold, which defines how much damage it takes before a car must be declared a total loss.

• In some states, the threshold might be 70% or 75% of the car’s value.
  Others use a “total loss formula”, which adds the cost of repairs to the vehicle’s salvage value and compares that total to its ACV.

If the repair costs exceed that number, your insurer is legally required to total the vehicle and pay you its market value instead of repairing it.

How insurers decide when your car is a total loss

States use two main approaches to determine whether a damaged car is beyond repair: the total loss formula and the percentage method.

Under the total loss formula, your insurer adds the estimated repair costs to your car’s salvage value — what it could sell for in its damaged condition. If that total is greater than the vehicle’s actual cash value (ACV) — its market value right before the crash — the car is considered a total loss.

Here’s what each term means:

• Repair costs. The total expense to restore your car to its pre-accident condition, including parts and labor.
• Salvage value. The amount your insurer could recover by selling the damaged car to a salvage yard or buyer.
• Actual cash value (ACV). What your car was worth immediately before the accident, factoring in depreciation, age, mileage, and overall condition.

In states that use the percentage method, insurers must total a car if repair costs exceed a certain percentage of its value — often 60%, 70%, or 80%, depending on the state. Some states even set it at 100%, while others leave the decision to the insurer’s discretion.

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How state laws affect when a car is totaled

Each state has its own rules for when insurers must declare a car a total loss. Some specify a set percentage of the car’s pre-accident value, while others use a formula that considers both repair costs and salvage value.

The table below shows total loss thresholds by state, so you can see how the rules differ depending on where you live.

Thresholds vary widely by state. For instance, Oklahoma’s threshold is just 60%, so even moderate damage can lead to a total loss. Florida’s limit is higher at 80%, meaning repairs must cost most of the car’s value before it’s totaled. Texas sets one of the strictest standards — damage must equal 100% of the car’s value to qualify as a total loss.

Meanwhile, California doesn’t use a fixed percentage at all; instead, it relies on the Total Loss Formula, which lets insurers factor in the car’s salvage value when deciding.

What happens if I want to keep my totaled car?

If your insurer declares your car a total loss but you can’t bear to let it go, you may have the option to keep it — a process known as “retaining salvage.” It’s possible in many states, but it comes with specific steps, reduced payouts, and long-term trade-offs.

What to expect

When a car is totaled, your insurer pays its actual cash value (ACV) — what it was worth right before the accident — minus your deductible.

If you decide to keep the car, the insurer also subtracts the salvage value, or what it could have sold the damaged vehicle for at auction. You’ll receive the remaining payout and be responsible for all repairs yourself.

Once repaired, your car will carry a salvage or rebuilt title, which can affect your ability to get full coverage, financing, or a good resale price later on.

How to do it

• Notify your adjuster right away. Let them know you want to keep the vehicle. If you wait too long, it may already be sent to auction.
• Ask for the numbers in writing. Request a breakdown of the salvage value and your adjusted payout so you know exactly what you’ll receive.
• Get multiple repair estimates. Use shops experienced with rebuilt vehicles and confirm what’s required to pass inspection in your state.
• Check DMV and insurance rules. Some states require additional inspections, and many insurers will only provide liability coverage for rebuilt cars.

What to keep in mind

You can’t require your insurer to pay more than your car’s market value, and rental reimbursement usually stops once the vehicle is totaled. Also, storage and towing fees can add up quickly, so arrange to move the car as soon as possible.

Can I refuse the total loss settlement from my insurance company?

When your car is declared a total loss, your insurer offers a settlement based on its actual cash value (ACV) — essentially what your car was worth right before the accident. Most disputes arise not because drivers want to keep the car, but because they feel the payout is too low to replace it with a similar vehicle.

Your insurer determines ACV using several factors:

• Your car’s pre-accident condition
• Logged mileage
• Optional features or upgrades
• Local market prices for similar models

If the amount seems off, you don’t have to accept it immediately. You can take steps to challenge the valuation.

How to dispute your total loss payout

If you think your insurance company undervalued your car, here’s what to do:

• Get an independent appraisal. Hire a certified appraiser or local body shop to provide a written valuation of your vehicle.
• Share your documentation. Present the appraisal, comparable vehicle listings, and maintenance records to your insurer as evidence of your car’s true market value.
• Contact your state’s insurance department. If you can’t agree on value, a consumer representative can review your case and help mediate with your insurer.
• Weigh your next steps carefully. If negotiations stall, you can pursue arbitration or litigation — but consider the potential legal costs compared to the amount in dispute.

The bottom line

Having your car declared a total loss can feel like the insurance company holds all the power — but you do have options. You can question the valuation, request a second opinion, or file a complaint with your state’s insurance department.

Whether you’re trying to keep your car, negotiate a better payout, or understand your state’s total loss rules, knowing how the process works gives you leverage. Don’t rush to take the first check if it doesn’t feel right. Ask questions, compare numbers, and make sure you’re getting what your car is truly worth.

Michelle Megna

Contributor

 

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Michelle, the former editorial director, insurance, at QuinStreet, is a writer, editor and expert on car insurance and personal finance. Prior to joining QuinStreet, she reported and edited articles on technology, lifestyle, education and government for magazines, websites and major newspapers, including the New York Daily News.