What Happens When Your Car Is Totaled? Insurance Process and Next Steps
It's your worst nightmare. Another vehicle hit your car at high speed on the interstate. Luckily, you walked away uninjured, but there's severe damage to your vehicle. Is the car totaled, you wonder?
It's a valid question that comes up anytime a collision occurs. Ideally, insurance pays to repair your vehicle. But if it's not worth fixing, the insurance company may declare it a loss.
What Does "Totaled" Mean?
Totaled is short for "total loss." It means the vehicle sustained too much damage to warrant repairing. The cost to repair it may exceed the car's actual cash value.
When is a car considered totaled? Insurance companies make that determination based on the vehicle's condition and estimated repair bills. If the repairs cost more than the car's worth, they'll declare it totaled. State laws can also impact an insurer's decision to total a car. Some states use a percentage of the vehicle's fair market value to determine whether it should be declared a total loss.
Initial Steps To Take
You may suspect a car's totaled following a wreck, but you won't know for sure until an insurance adjuster evaluates it. In the meantime, there are a few things you can do.
1. Document Vehicle Damage
If possible, take pictures and video of the car after an auto accident. Look underneath for dripping oil or coolant fluids and document damage to its frame and body. If there is interior damage (such as an exploded airbag), take a picture of that, too.
While an insurance examiner should evaluate the car in person, the pictures may come in handy if questions arise. You can also submit them with your claim.
2. Notify Your Insurance Provider
Your next step is to notify your car insurance company. Most insurers allow you to initiate a claim through their website or app, but you might call them if you'd prefer to talk with a representative.
Once you start a claim, the insurance company takes over. If the accident involves other drivers, your insurer may connect with their insurance providers to figure out the next steps.
3. Confirm Total Loss Status
Your insurance company will notify you if it declares the car a total loss. If the total loss declaration comes as a surprise, you can ask for underlying details, such as what estimates they used and how they determined cash value.
Keep in contact with your insurance company throughout the claims process. Representatives may ask you to clarify certain details about the wreck or for information about your car.
How To File a Total Loss Claim
Most companies accept online and offline claim filings through their website or a dedicated customer care hotline. It's helpful to have your insurance card or policy information with you, since you may be asked to share details about your account.
The claim application will request basic information about the accident. Share the contact details and insurance information of any other drivers so the insurance company knows who to reach out to. If you have a police report number, you can provide that, too.
Once the claims process starts, your insurance company will reach out with updates. You can also monitor the claim online through your insurer's website.
Assessing Your Car's Actual Cash Value (ACV)
A vehicle's actual cash value depends on its condition. Severely damaged cars requiring extensive repairs aren't likely to command a significant actual cash value. Insurers also consider other factors, such as what a salvage yard is willing to pay for the vehicle in its current state.
Insurers may also use in-house total loss formulas to determine actual cash value. Those models consider the car's age, make and model, mileage, and damage to arrive at a final number.
Know that actual cash value is negotiable. If you disagree with the insurer's assessment of your car's worth, ask for a higher payout. It helps if you have evidence to back up your request, such as reliable third-party estimates.
What If You Owe Money on a Financed Car?
There's a risk that a totaled vehicle may be worth less than its remaining loan or lease balance. Unfortunately, if your insurance company decides to value your car for less than what you owe, you're still on the hook for paying off the rest of the balance — even if you no longer have access to the vehicle.
As an example, say you purchase a $40,000 SUV. After a year of driving the car, it's totalled in a wreck. The insurer declares its actual cash value to be $20,000, but you still owe $33,000 to the auto lender. The insurance payout goes to the lender, reducing what you owe to $13,000. You'll continue to make payments until you satisfy the loan.
You can avoid this situation by carefully choosing insurance coverages. Add gap insurance to your policy until you pay off the vehicle. Gap coverage fills in the difference between what collision insurance pays and what's owed on the car.
How does gap insurance work if your car is totaled? In the earlier example, it would pay the $13,000 difference, so you wouldn't have to.
Prevent a Loss and Get Your Car Insured
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