When car insurance providers declare a damaged vehicle a total loss, it means the car can’t be repaired to safety guidelines or the required car repairs cost too much. Depending on state fault laws, the type of car accident, and your insurance coverage, you could receive an insurance settlement based on the pre-accident value of your vehicle.
What does it mean when your car is declared a total loss?
Total loss cars cost more to fix than they’re worth. Auto insurance companies determine whether or not your vehicle is a total loss, but they have to follow state guidelines while doing so.
Depending on your state of residence, there are two possible sets of rules when it comes to declaring a totaled car:
- Formula model: A vehicle is declared a total loss if the cost of its repairs plus salvage value equals or exceeds its pre-accident fair market value.
- Threshold model: A vehicle is declared a total loss if the cost of its repairs equals or exceeds a certain percentage of its pre-accident fair market value. State laws determine the percentage value, which can range from 60–100%.
Here’s a quick key to determining a totaled car in each state:
| Method used | States |
|---|---|
| Total loss formula | AK, AZ, CA, CT, DE, GA, HI, ID, IL, ME, MA, MS, MT, NJ, NM, OH, PA, RI, SD, UT, VT, WA |
| Total loss threshold (100%) | CO, TX |
| Total loss threshold (80%) | FL, MO, OR |
| Total loss threshold (75%) | AL, KS, KY, LA, MD, MI, NE, NH, NY, NC, ND, SC, TN, VA, WV, WY |
| Total loss threshold (70%) | AR, ID, IA, MN, WI |
| Total loss threshold (65%) | NV |
| Total loss threshold (60%) | OK |
What happens when your car is declared a total loss?
After an accident, your insurance provider will send an adjuster to assess the damages to your vehicle. If the adjuster determines that your car meets the criteria for a total loss, you’ll receive a payout based on the vehicle’s actual cash value (ACV), or the value of your car before it was totaled.
The exact formula for calculating a car’s ACV depends on your state’s regulations, but it generally starts with your vehicle’s original purchase price and subtracts its depreciation rate multiplied by its age.
ACV calculations also incorporate data from internal and external databases (like the North American Automobile Dealers Association (NADA), plus factors like your vehicle’s:
- Accident history
- Condition
- Odometer reading
- Salvage value
- Year, make, and model
Depending on the types of coverage you carry and the nature of the accident, you may need to pay your deductible before you can receive a payout for your totaled car. If your car is financed, the payment will be sent to your lender instead.
Fault can impact your ability to get a payout for a totaled car
The way you’ll file a claim for a totaled car generally depends on who caused the accident.
- If you’re not at fault: You can file an insurance claim with the at-fault driver’s auto insurance provider. The maximum amount of damages you can claim depends on their property damage liability insurance coverage limits.
- If you’re at fault: Depending on your state’s negligence laws, you may still be eligible for a portion of your damages. You can file a claim with the other driver’s car insurance company while they do the same with yours.
What type of insurance covers a total loss?
Several insurance products provide a payout for total-loss vehicles, but different types of coverage apply to different scenarios. Here are the primary types of insurance you could use in the event of a total loss:
| Scenario | Applicable coverage | Applies if at-fault | Applies if not at fault |
|---|---|---|---|
| You, a household member, a driver listed on your car insurance policy, or someone who borrowed your car with permission collide with another vehicle or stationary object. | Collision coverage pays for any repairs and replacements resulting from a car accident. | Yes | Yes |
| Your car is stolen or damaged by vandalism or a weather-related event. | Comprehensive insurance covers every non-accident-related mishap that could befall your car. | Yes | Yes |
| Your car is damaged in a hit-and-run, hit by an uninsured driver, or hit by a driver whose coverage limits aren’t high enough to cover the cost of replacing your car. | Uninsured motorist / Underinsured motorist property damage insurance (UMPD) fills the coverage gap left behind by an uninsured or underinsured driver. UMPD isn’t available in all states. | No | Yes |
A full-coverage policy includes the minimum car insurance necessary in your state plus collision and comprehensive coverage. It’s also a prerequisite for two other add-ons that are worth special attention: gap insurance and new car replacement insurance.
- Gap insurance (or gap coverage) applies to leased or financed vehicles. If your vehicle is destroyed and the settlement falls short of the remaining balance on your car loan, gap insurance will make up the difference.
- New car replacement insurance ensures your totaled car payout will be enough to cover your previous car’s newest, latest version (or something just as good).
How to get the best payout for your totaled car
After filing a claim, the insurance adjusters assigned to your case will assign fault and determine compensation. However, that doesn’t mean that the amount of your settlement is set in stone.
You may negotiate a higher total loss settlement with your insurance provider
Reporting an accident to your provider follows many of the same steps as filing a car insurance claim: call your insurance agent with your insurance card in hand and provide details of the car accident, including the time, date, and any photos and notes you recorded. If necessary, you should also pass on contact details for your lending or leasing company.
The company will assign an insurance adjuster to your case. If you and the other driver file a claim with each other’s insurance companies, the claims adjusters will both investigate the accident, and they’ll negotiate whose insurance company pays for what.
Once the question of fault is settled, your insurance provider will reach out with a settlement offer.
Be prepared if you plan to make a counteroffer
If you’re planning to make a counteroffer, do your homework first. Here are some things that might support your argument for a higher reimbursement:
- A list of vehicle, trim, and package features drawn from the manufacturer’s sales brochures
- A report from a private appraiser
- Estimates of your vehicle’s value from sites like Edmunds or Kelley Blue Book
- Receipts demonstrating regular maintenance
- Receipts of recent mechanical work
- Sales listings for similar vehicles in your area
If you and the insurance adjuster can’t agree on your vehicle’s actual cash value, you may need to contact your state’s Department of Insurance for help. However, if you’re happy with the full settlement offer, you can accept it. The insurance company will remove your totaled car and issue you a check.
Unfortunately, unless your state mandates a maximum turnaround time, it could be weeks or months before you receive the payout for your total loss claim. That’s why before you choose an insurance company, it’s important to read reviews to determine how customers rate the claims handling process.
When you shop for car insurance with Jerry, you can read real customer reviews right in the app, so it’s easy to feel confident that you’ll be taken care of if you have to file a claim.
You may be allowed to keep your totaled car at the cost of its salvage value
If your car insurance company approves your claim and you agree on a settlement, you can inquire about keeping the car. Generally, the terms of a partial settlement include subtracting both your deductible and your vehicle’s scrap value from the payout.
After that, what you do with your car is up to you. Here are a few ideas:
- Donate it: Charitable organizations across the country use donated cars for parts or refurbishment. You can order a pickup, get a tax receipt, and contribute to a good cause at the same time.
- Rebuild it: Rebuilding a totaled car requires both a salvage title and, eventually, a rebuilt car title. It also requires a significant amount of money. Not only will you have to pay for the cost of repairs, but you’ll probably also pay higher-than-average rates to insure a rebuilt car.
- Sell it for cash: If you want to sell your car to a scrap or junkyard, find the title first so you can sign over ownership.
FAQ
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What do insurance companies do with totaled cars?
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Can you repair a totaled car?
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Does a total loss affect your credit score?
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How is actual cash value calculated?
Liz Jenson is an insurance writer who specializes in general automotive and insurance topics. Liz’s mission is to produce informative and useful content to help car owners make smart choices when buying cars and car insurance. Since joining Jerry in 2021, Liz has written nearly 4,000 long- and short-form articles on topics including state-specific insurance recommendations, common car insurance questions, and deep dives into vehicle model details. Before they came to Jerry, Liz was a full-time student at Indiana University, Bloomington working on a double major in English and French.
Expert insurance writer and editor Amy Bobinger specializes in car repair, car maintenance, and car insurance. Amy is passionate about creating content that helps consumers navigate challenges related to car ownership and achieve financial success in areas relating to cars. Amy has over 10 years of writing and editing experience. After several years as a freelance writer, Amy spent four years as an editing fellow at WikiHow, where she co-authored over 600 articles on topics including car maintenance and home ownership. Since joining Jerry’s editorial team in 2022, Amy has edited over 2,500 articles on car insurance, state driving laws, and car repair and maintenance.
