Crashed your car? Bummer. Even worse is getting a call from your auto insurance company saying it’s a total loss and should go to the junk yard.
Your attachment to your vehicle may be sentimental. In some cases, your bond may be financial: you may not be able to replace the totaled car with the money your insurance company is willing to pay. There are options — learn more about what happens when your car is totaled and what you can do.
What does it mean when a car is totaled?
Typically cars are totaled when damage exceeds 65% or 70% of the vehicle’s market value. Rick Ward, director of auto claims for MetLife Auto & Home, says the standard for deciding when a car is a total loss varies by company and may be set by state regulators. You can find out the threshold by contacting your insurance agent.
What happens when insurance totals your car? Obviously, it’s not the best news, especially if you really like the vehicle. In general, here’s the process of what happens when you total your car:
The insurer will calculate the car’s actual cash value (ACV). The ACV is how much your vehicle is worth after factoring in depreciation. On average, vehicles depreciate more than 20% the first year and approximately 10% each additional year for the first five years, according to Erie Insurance reports using Carfax data.
After that, the insurance company will calculate an estimate of the car’s market value, based on the make, model and year, mileage, and condition, as well as the demand in your area for the type of vehicle you have.
Another factor used to estimate the car’s value is the resale value of the parts and the metal.
If the cost of repairs plus the scrap value equals or exceeds the ACV of your car before the accident, then it is totaled.
What happens when insurance totals your car?
Car insurance companies find that many older cars are simply not worth repairing.
“We determine the value of your car through market research,” explains Ward. “There are three software providers that provide vehicle valuations, Blue Book averages and what cars are selling for in your area through dealer networks.” But this software isn’t available to consumers.
According to ISO data reported by the Insurance Information Institute, the average collision claim in 2019 was $3,750. The average auto liability claim for property damage was $4,525.
If you think your totaled car is valuable enough to justify a repair, you can contest your insurance company’s decision to declare it a total loss, but be prepared to provide evidence that the car is worth the effort.
If you can demonstrate good maintenance and mechanical improvements, you may be able to win your totaled car a reprieve. Its age and mileage will be key factors.
Can you keep your car if it’s totaled?
If you decide to accept the insurer’s decision to total your car but you still want to keep it, your insurer will pay you the cash value of the vehicle, minus any deductible that is due and the amount your car could have been sold for at a salvage yard. It then will be up to you to arrange to make repairs.
“They will cut you a check,” says Ward, and then you’re on your own.
Safety should be your primary concern when keeping a totaled car.
If damage to the totaled vehicle is mostly cosmetic, you may be able to put it back into service for a modest cost. However, if fixing the car means reaching deep into your pockets, you may be better off letting it go.
There is a good reason why car insurance companies are cautious about fixing badly damaged cars, says Ward. “Cars are complicated. All damages are not visible. Once you start dismantling, often you find additional damage.”
You think twice about repairing a car that has been seriously damaged. If the professionals who work for your automobile insurance company think the car is beyond repair for a reasonable cost, it probably is. Damage, such as cracks in frames or to airbags, often can’t be seen by just looking at a vehicle.
Finding car insurance for a totaled vehicle
Ward says you may run into trouble when you seek auto insurance for a car that has been declared totaled. Your ability to buy collision and comprehensive coverage may be affected.
“That is really up to each individual company,” he says. Before you decide to fix your car, check to see if that is an issue.” Some insurers will not accept a car with “a branded title,” he adds. “It basically puts a stamp on it that says it is a salvaged vehicle.”
Ward notes that the federal government has established a database called the National Motor Vehicles Title Information System to provide information to car shoppers. “All total losses are recorded by the insurance companies. What this does is provide consumers with a database to see if a car has been previously salvaged.” That means don’t count on being able to unload your vehicle on a buyer.
Is repairing a totaled car worth the effort?
Only you can decide whether repairing your totaled car is worthwhile.
“The best thing is to be well informed,” says Ward. “Talk to your mechanic. Do your research. Make sure you know what you are getting yourself into.”
Keeping a totaled car FAQs
Below are more details on what happens when a car is totaled.
How to determine if my car is totaled
If your insurance company says your car is a total loss (AKA totaled), it means the cost of repairing your vehicle is more (or close) than the car’s value. Your insurance company will pay you to replace the vehicle instead of repairing your totaled one.
What happens when you total your car?
If you’ve been in a serious accident, the insurance company will run calculations on how much it would cost to repair your car vs. how much your car is worth. Cars are typically totaled when the damage exceeds 65% or 70% of the car’s market value. You’ll receive a check for the current cash value of the vehicle from your insurance company. The totaled car can be sold for pennies on the dollar as a salvage vehicle, donated, or you may keep it if you feel it’s worth repairing.
If the insurance company finds that the cost of repair is close to or greater than its market value, they will declare it a total loss and cut you a check for the vehicle’s cash value. You can use the insurance funds to purchase another vehicle, or to keep the totaled car and pay for the repairs yourself from the check. Keep in mind that insuring the totaled vehicle may be difficult or expensive in the future, not to mention the expense of the extensive repairs.
What happens if you total a leased car?
Similar to what happens when your car is totaled, you’ll receive a check for the leased vehicle’s value. The problem is, you’ll owe the remaining payments to pay off the lease, which typically amounts to more than the vehicle’s cash value. You’ll need to come up with the difference out of pocket, unless you had gap insurance coverage for any shortfalls.