How to Deal with a Totaled Vehicle

A car is considered totaled in most cases if the cost to repair it after damage or an accident is more than the car’s value. There are some states with laws about what’s considered a total car. For example, in Alabama, the car is totaled if the damage is more than 75% of the value. 

In other cases, when there aren’t state laws, the insurance company will determine if your car is a total loss. 

When you’re dealing with a totaled vehicle, there are things to know. It’s not always as easy as selling the car for cash, although that may be your best option in some cases. We cover what you should know below. 

What is a Totaled Vehicle?

A totaled car is something that varies by definition depending on where you live and also who’s at fault in an accident if another person is involved. If there’s damage to your car and you’re in an accident with someone else, it could be covered by your policy or the other driver’s. 

If you file an insurance claim, you’re assigned an insurance adjuster. That person will decide how much they think the insurance company should pay on your claim. 

The adjuster may decide your car isn’t worth repairing at all; thus, the term totaled or total loss. Insurance companies have formulas to determine if a car is totaled. 

From there, if that’s the determination the adjuster makes, you have a few key options. 

The Insurance Company Pays You

The easiest way to deal with a totaled car is to take a payment from the insurance company. The insurance company could replace your totaled vehicle with a comparable one. The insurer might also offer you cash that’s equal to the actual cash value of your totaled car. 

Your insurance company will probably make an initially low offer, and you can challenge that. 

If you take the cash payment and you still owe money on your loan, the insurance company usually makes out a check to you and your lender. After you pay off the loan, you can keep the difference. In some cases, the payment from the insurance company may be less, so you have to pay the difference. 

The insurance company will pay the actual cash value or ACV of a totaled car. The ACV is how much your vehicle was worth right before it was damaged, considering the age, make, model and condition. If you agree on a cash amount with the insurer, you’re paid that minus the deductible. 

In some states, the payment will include the taxes and fees that are involved with buying a replacement. 

Do the Repairs Yourself

You may also be able to keep a totaled car and then pay for your own repairs. Your insurance company will deduct the vehicle’s salvage value, which is what they would have gotten had they sold it to a junkyard. 

If you do this, your car will probably get a salvage title until the repairs are completed and your car is inspected. A total loss will also be part of the car’s history report, and you may have a hard time insuring it or selling it as a result. 

If you repair the car yourself, you’ll have to think about what it will take to actually make it drivable. 

Get multiple estimates to figure out what the repairs will cost, and then calculate that compared to what it will be worth after those repairs. Keep in mind how long you’ll realistically keep driving the vehicle if you get it repaired. 

Leave Your Car As-Is

If your car is a total loss to the insurance company, but you can still safely drive it, you may just keep using it. If you don’t have coverage like comprehensive or collision that will cover repairs, you may opt to go with this option. 

If you’re going to drive a car that’s totaled, you should take it to a qualified mechanic to make sure it’s safe to do so. 

Selling a Totaled Car

You can sell the car for parts if you prefer. When you do this, you can maybe get back some of the value, and you could then put that aside to buy another car. If the accident was your fault, you could use the proceeds of selling the car to cover the damages. 

It’s not easy to sell a totaled car, but it’s possible. 

What If You Owe Your Lender More Than the Payment You Receive?

We touched on this above, but if you accept cash payment for your totaled car from an insurance company, you’ll get a claim check. The check will be made out to you and your lender if there’s still a loan on your vehicle. You’ll have to come up with an agreement with your lender on how the money is released. 

Usually, the lender gets reimbursed first, and you get what’s left. 

If you owe more than what the payment is, as we talked about above, you’re responsible for paying the balance on your loan or lease. 

The best way to protect against this is to have loan or lease gap coverage. You can usually add this to your car insurance policy, which can prevent you from having to pay out-of-pocket for a totaled car. 

You might also be able to get this as stand-alone coverage. Usually, it’s only available if you get a brand new car. 

Finally, some people think that if they’re in an accident and their airbags deploy, it’s automatically a total loss. That’s not the case. It’s up to the insurance adjuster even if the airbags deploy to figure out what they think should be done. Even if the airbags do deploy, if the cost of repairs is less than the value of your car, it’s probably not going to be called a total loss. 

If you’re in an experience with a total loss, think over your options and do some simple calculations to figure out which will make the most financial sense.