Your Car Is Totaled. Now What?

Minutes after a car sideswiped me a few years ago when its driver veered out of the turn lane to instead go straight, one of my first thoughts was if I’d get enough money from my insurance company to buy a similar car.
I wasn’t worried about being injured (I was okay) or that the driver sped off. I knew the accident wasn’t my fault, so I wasn’t worried about my insurance rate rising. What worried me the most was that my insurer would deem my car a total loss and that I’d only get the current value of the car, which I suspected was no more than $2,000. That wouldn’t go far in helping me buy a new or used car.
In the end, I didn’t have to file a total loss claim. My car escaped being listed as a totaled vehicle, but only by a few hundred dollars.
But I almost didn’t get that break. The repairs initially were estimated to cost more than what my insurance company said the car was worth, but I convinced the adjustor that it was worth slightly more because of the extremely low mileage on it. Driving only locally had finally paid off. The car’s value was increased by a few hundred dollars, and I didn’t have a totaled vehicle on my hands.
But what happens if you aren't so lucky and your vehicle is deemed "totaled?" Here's what you can expect.

What is a totaled car?

A totaled car is when repair costs exceed the car’s value and the car can’t be repaired at all. If a car is worth $2,000 (as mine initially was) and repairs cost $2,500, then the insurance company declares it a totaled vehicle because it costs more to repair than its value.
Instead of repairing it, the insurer will pay what the car was worth before the accident. In the example above, that’s $2,000 minus the deductible.
Fixing my car was pretty straightforward. Luckily, no other expenses popped up during repairs. But because they can, some insurers will list a car as totaled if the damage looks like the car’s value falls well below 100%. Some state laws say how much damage is necessary to total a car, which can be as low as 50% of its value.

What to do when your car’s totaled

Not every car owner gets as lucky as I did. Whether your car is declared totaled or not after an accident, there are things you should do to ensure it goes smoothly.
The obvious first steps are to make sure no one is hurt and to get them medical help if needed, and to call your insurance company for help. Here’s a breakdown of some of the steps to take after your car has been totaled.

Call for help

Once you’re parked in a safe area, if you can move your car at all after an accident, then you should seek medical attention if you think you need it. We’re not going to go over all of the necessary steps immediately after an auto accident, but making sure you’re not injured should be the first one.
After that, you can call the police if needed, and can call a tow truck. Your insurance company may help with some of these details.
Your first inclination may be to call your insurance agent and discuss your insurance coverage. They may be able to help, but they’ll likely refer you to the claims department that is part of auto insurance companies to deal specifically with accidents and helping you file an insurance claim.
A toll-free phone number to make a claim and get help after an accident should be on your insurance card, which you hopefully have on you or a copy of in the glovebox.
The insurance representative will probably ask you to get the insurance information of the driver who hit you. If they’re not around, as the driver who hit me wasn’t, then tell your insurance company what happened.

Have your car towed

You can have your car towed to any body shop or mechanic you want, but it may be easier to work with a shop approved by your insurer.
I waited until I got home to call my insurance company, which offered me a few auto body shops to go to. The benefit of going to one they work with is that the process will be streamlined and should go faster.
The body shop will fully explain to the insurance adjustor what the cost of repairs is. The adjustor may go there to take photos of the car and will decide if the car is a total loss.

Gather documents

Your insurance policy may provide some answers to your questions to the insurance adjustor, so it can help to have that at hand when you talk with them.
They may ask for your car’s title and sales receipt to help determine the car’s value. If you don’t know where the title is, you can get a copy from the DMV. If you have a car loan that you’re still paying off or are leasing, then the lender or lessor will provide the title.

File a claim

If you caused an accident or something else did, then you need to file an insurance claim on your collision coverage or comprehensive coverage. Your insurer will reimburse you for the totaled car’s value, minus your deductible and up to your policy limits.
Collision coverage pays for damage caused by a covered accident with another vehicle, person, or object. It’s optional in some states, though a lender may require it if you lease or are financing the car. If your car hits an object, such as a tree, you’re covered.
Comprehensive coverage pays to replace or repair your car if it’s stolen or damaged in an accident that isn’t a collision. Sometimes called “other than collision” coverage, it usually covers damage from fire, vandalism, or falling objects such as a tree. This is optional insurance if you own your car. If you’re financing or leasing it, your lender will often require comprehensive insurance.
If you get in an accident that wasn’t your fault, a property damage claim may need to be filed with the other driver’s insurance company.
Their insurance will reimburse you for the car’s actual cash value, up to their policy limits. If those aren’t enough to cover the full value of your car, you can sue them for the remainder or file a claim with your uninsured/underinsured motorist insurance.

Pay a deductible

Whether your car is repaired or you’re paid the actual cash value of a totaled car, you’ll first have to pay your insurer the deductible. To put it simply, this is the amount you’ll pay out of your pocket for an accident before the insurance company pays the rest.
The average deductible is $500, according to Car and Driver. A high deductible can save you money on the insurance premium.

Determine actual cash value

This is one of the biggest and most important steps after a car accident, though it’s one that you as the owner don’t have much control over.
Called ACV for short, actual cash value is worth before it was damaged. Factors that are considered include your car’s:
  • Age
  • Make
  • Model
  • Condition
  • Mileage
  • Optional features
It isn’t based on any sentimental value or if you can afford a new car after the payout. A claims adjustor or appraiser makes the assessment based on cold, hard facts.
As mentioned earlier, ACV thresholds can vary by state. A wrecked car that’s worth $5,000 in Iowa would only need $2,500 of damage to call it a total loss because Iowa has a 50% threshold to list it as a total loss. You’d still get $5,000 for the totaled car, but the insurer won’t pay more than $2,500 to fix it.
You don’t have to accept the valuation by your insurer. You can compare the estimate to values listed at Kelley Blue Book or NADA Guides by comparing mileage, optional features, and other factors. Your insurance company may allow you to ask for an independent appraisal.
If you do agree, you’ll be paid the ACV minus your deductible.

Shop for a new car

This can be the “fun” part of having a totaled vehicle. You get to shop for a new or used car, which will probably be an upgrade from the car you just lost. But unless your totaled car was relatively new or you had new car replacement insurance, you’ll probably have to pull a good chunk of cash out of your pocket to buy a vehicle that’s similar to what you had.
This was why I was thrilled that my car wasn’t declared a total loss. Buying a similar car would have cost me about $6,000 of my own money, and a new one would have been about $27,000 more than the actual cash value.

Replacing your totaled car

The biggest cost of having a totaled car is buying a new one. You can save money by buying a used car, but even that will probably be more than what you’ll get in actual cash value from your insurer for your old, totaled car.
A car’s value is based on 20 to 40% of the fair condition value found in Kelley Blue Book. So if your $10,000 car was in fair value before the accident, an insurer would pay you $2,000 to $4,000 for it. That’s before your deductible is factored in.
You could end up with a $1,500 to $3,500 insurance payout for a car that costs $10,000 to replace with a similar one after your deductible is subtracted. You’d have to come up with $6,500 to $8,500 of your own money to buy a similar car.

New car replacement insurance

One way to make sure you have enough money to buy a new car after a major collision is to have new car replacement insurance.
If your car is totaled, it will pay you enough to buy a new car of the same make and model instead of the depreciated value of your totaled car. (You’ll still have to pay the deductible.)
There’s also better car replacement option that will pay for a car that’s one model year newer and has 15,000 fewer miles.

Gap insurance

If either of the above two scenarios exists, you may also need gap insurance. If you owe more money than the car is worth, such as $10,000 left on a loan where the car is only valued at $7,000, then gap insurance will cover the $3,000 difference. Without this insurance, you’re responsible for paying off the loan balance.
It may sound odd, but if you owe money to a lender or a leasing company, you’ll have to pay those off before you get any balance towards a new car. The insurer will pay the leasing company first. If you have a car loan, your insurer will pay the loan off first before you get what, if anything, is left.

Costs of replacing your totaled car

If you do not have insurance coverage for replacement, unfortunately you will have to pay for a new vehicles yourself. If you elect not to have coverage to keep the cost of auto insurance down then be sure you have some money set aside for emergencies.
Unless you have an emergency savings account, you can budget for this possibility by saving for it each month. Putting aside $200 each month nets you $2,400 in savings each year, and within three years you’ll have enough money for a good down payment if your car is totaled.
Your insurance deductible is another expense to consider. It averages $500, so remember to factor that loss when saving for a new car.
Many of the other potential costs of totaling a car have to deal with insurance. Here are some of them:
Insurance for your next car. You’ll probably buy a newer model car than the one you just had totaled. A 2021 car, for example, is more expensive to insure than a 2011 model because the new car is more expensive to repair, usually, than the older car. One insurance website found that rates drop 3.4% for every year a vehicle ages, and an eight-year-old vehicle is 25% cheaper to insure than a new one.
New car replacement insurance. If you didn't have this before, now may be the time to add this insurance. This optional insurance will pay for the full cost of a new car for up to 3 years after you’ve bought a new car. It’s a way to cover depreciation costs. Expect it to add 5% to the price of a car insurance policy.
Gap insurance. Gap insurance may be needed if you’re leasing or getting a car loan. It covers the difference between the car’s value and what you owe. It typically costs $500 to $700 from lenders and dealerships, according to Car and Driver. It can be a lot cheaper for your car insurance company, adding an average of $20 to $40 per year when added to an existing insurance policy.
At-fault auto insurance. If the accident was your fault, expect your next auto insurance premium to increase unless you have accident foregiveness. The national average rate increase is 41% for drivers with a clean record who cause an accident. This is a good time to shop around for car insurance.

Keeping a totaled car

If you don’t want to accept the actual cash value for your totaled car, keeping it can save you the cost of buying a new car.

Negotiate a higher payment

You can negotiate for a higher payment if you don’t think the claims adjustor accurately determined the value of your car. You’ll have to prove that your car is worth more than what’s being offered as an average for similar cars.
Start by comparing cars that are the exact same model and have the same accessories and mileage that your car did before the accident. If they don’t reassess the ACV and won’t accept your plea, you can decline the payout and choose to keep the car.
This requires spending your own money to fix it. If my car was deemed a total loss, I don’t think I would have done this because opening the driver’s door was difficult and would cost more than the car’s value to fix. But if it was cosmetic damage, such as a dented door, I might have driven it anyway with the damage.
If your insurance company won’t give you enough money to buy a replacement car, then keeping your old car that may now look like a wreck may be worth it.

Salvage value

Unless you keep your totaled car and have it fixed, it will likely be auctioned off by your insurance company to a salvage yard. The insurer will deduct the salvage value of the wrecked car, which is the amount it expects to get for it, and it will subtract your deductible if you’re at fault. You get any money that’s remaining.
If you keep the car — and state laws can vary on allowing this — then the insurer will get bids from different salvage companies and set the fair market value from them. The amount will be deducted from the insurance company payout to you.
You’ll then get a salvage title for the car. This means your car was determined a total loss by an insurer, which can make it hard to get auto insurance for and it may be difficult to sell it later.

The bottom line

Having your car totaled shouldn’t leave you without a car to drive. If your car isn’t worth fixing, your insurer should pay you the value of your car before the accident. In theory, that should be enough to get you a similar car.
Theories don’t always hold in real life, however. You’ll likely have to come up with more money to buy a car than whatever the payout is. That’s frustrating, and can be used as an incentive to start saving now for your next car.

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