Does Insurance Pay Off A Totaled Car? | Emerge Insurance Agency % Skip to main content

Does Insurance Pay Off A Totaled Car?

By February 22, 2021Insurance

Totaled CarNearly 7 million car crashes occur in the U.S. each year. Some of those accidents are worse than others, leaving drivers with a totaled vehicle, according to data from the Department of Transportation.

Whether a car is considered totaled and how much car insurance will cover could depend on where you live and what type of policy you have. The guide below will cover everything you need to know if your car is totaled in an accident.

If you’re unsure if your current car insurance policy covers you for these types of incidents or if you’d like to switch providers to include more coverage, then contact our office.

A car is considered totaled when the cost of repair exceeds what the car is worth or the car is completely irreparable. Depending on who was at fault in the accident, your auto insurance or the other driver’s may cover the accident. A claims adjuster will determine how much the car is worth. Each state uses its own threshold for defining a car as totaled.

For example, in Florida a can is deemed a total loss under Florida law when the cost to repair it is 80 percent or more of its ACV – actual cash value. Meanwhile, the threshold in Iowa is 50%, meaning a $10,000 car would be totaled if it needed $5,000 of repair work. Most states fall in the 70-80% category.

If your car is totaled and you’re responsible, your collision or comprehensive coverage should pay to replace it. Liability coverage is required in most states, whether you own your vehicle or not. If you’re leasing or financing a car, collision and comprehensive coverage are likely required as well.

Collision coverage kicks in if your car is damaged or destroyed in a crash involving another vehicle, with comprehensive coverage protecting you against other accidents, like a tree falling on your car.

Without comprehensive and collision coverage, you could be paying to replace your totaled vehicle out of pocket.

How is the Value of a Totaled Car Decided

Insurers define the worth of your car as its “actual cash value.” This is the amount you’ll be paid for your totaled vehicle.

To determine your car’s actual cash value, the insurance company will consider its:

  • Age
  • Mileage and features
  • Condition
  • Resale value
  • Price tag on similar cars in the area

What To Do With Your Car When It Is Totaled

If your car is totaled, here are two of your best options for moving forward:

  1. Let your insurance company pay you
  2. Sell your car

 

Let your insurance company pay you

The easiest route to take after totaling your car is to accept your car insurance provider’s offer.

Your insurance company will either offer a comparable replacement vehicle or provide you with a check equal to the car’s actual cash value. You can compare their offer to estimates from Kelley Blue Book and J.D. Power and challenge their valuation if you think it’s too low.

 

Sell your car

Alternatively, you can sell the car, or its parts, yourself.

When your insurance claim is approved, the insurance company takes ownership of your car, usually selling its parts or metal.

If you keep the car, its salvage value will be deducted from the payout. From there, you can:

  • Sell the car’s spare parts
  • Sell the car to a junk or salvage yard
  • Pay to repair the car and sell it

Just note that repairing and reselling a totaled vehicle isn’t allowed in some states and can be costly, with some red tape like a salvage title and inspection requirements.

If your car gets totaled while you’re financing it, you still have to pay off the loan. Your insurer will pay the leasing company or auto loan provider first, with any remaining balance going to you.

When you owe more than the actual cash value, you’ll be responsible for paying the difference yourself. Gap insurance is designed to cover this difference and can be added to many policies.