“Total loss” is probably not something you want to hear after your car is destroyed in an accident or disaster, but it’s not all lost. If your vehicle is totaled and you have insurance coverage, the insurance company will pay a lump sum to cover the vehicle in lieu of repairs.
Here’s what you expect, what insurance is in effect, and how to navigate the process:
learn more: How does car insurance work? The basics have been explained.
Some states define the damage threshold when a vehicle is combined, such as 75% of the market value. For example, if the estimated repair cost exceeds $7,500, the vehicle worth $10,000 will be added up. In some states, insurance companies apply their own formula to determine if the car is total loss.
No, airbag deployment does not mean that the car will automatically be added up. The total depends on the value of the vehicle and the cost of modifying it. As long as the car can be fixed at a cost lower than the insurance company’s total loss threshold, the insurance company will usually pay for repairs rather than the vehicle’s total.
However, airbag systems are expensive, so the cost of replacing them can push up the total repair invoice over the total threshold, especially if there was a lot of other damage or if it is an old vehicle with much of its value lost.
In 2023, car insurance collision claims (27%), which increased 29% in 2023, were considered to have increased by 29% from 2023.
More cars are being added up as the costs to fix them are rising. Fantastic sensors, cameras, radar units, and other electronic components that make driving easier and safer are all expensive, so even minor crashes can cause expensive repairs. Modifying these components requires special equipment and training, which makes repairs more complicated and expensive.
According to the JD Power 2024 US Auto Claims Satisfaction Survey, the average cost of repairs for car insurance claims has risen 26% over the past two years.
Below are the types of car insurance you can pay for your total vehicle depending on the situation:
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Collision insurance After a collision with another vehicle or object, such as a building, you pay the actual cash value of the total vehicle. Deductible reduces bill payments.
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Comprehensive insurance We will pay you the actual cash value of the total vehicle after damages from vandalism, hail, floods, or other events. Just like collision insurance, the deduction reduces your payments.
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Property damage to other drivers Liability insurance If another driver is negligent, we will cover damage to your car in an accident. Their insurance will pay up to the limits of their driver’s policy.
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Uninsured driver property damage If another driver caused an accident but is not insured or adequately insured, insurance covers the damage to your car.
Most states require car owners to only purchase minimum liability insurance, while some states require uninsured driver insurance. To fully cover your car, you need collisions and comprehensive insurance. Both are options in all states, but your lender or leasing company will need them if you are still owing money for your car or leasing your vehicle.
read more: The most common types of car insurance explained
After submitting your car insurance claim, you will also need to get a quote from the repair shop, unless the vehicle is clearly summed. If the vehicle is repairable, the insurance company will send you a claim adjuster to assess the damage and estimate the cost of correcting it.
If the insurance company cannot safely repair it, it will determine whether the vehicle is a total loss or the estimated cost of correcting it will be worth or exceed in the event of an accident.
Generally, for a total loss claim, the insurance company will pay the actual cash value of the deductible vehicle. Actual cash value is the market value (the amount the car could reasonably sell) before any damage occurs. If another driver causes an accident, that driver’s license liability insurance will pay the actual cash value of your vehicle to the limits of their insurance.
Some states and insurance companies may also charge other fees, such as sales tax and replacement vehicle registration fees.
Yes, if you think the car is worth more than the insurance company’s offer, you can try to negotiate a higher settlement.
“To do that, you need to provide evidence such as mileage records, service history, and affidavits from a mechanic to show that your car is worth more than the typical car of the make and model,” says the Institute for Insurance Information (Triple-I).
Insurers should consult their industry databases to determine the actual cash value. Various businesses provide online resources for consumers to investigate the value of their cars. JD Power and Kelly Blue’s Book.
If you own the vehicle for free and clearly, you will receive an insurance check for the total vehicle. Your lease company usually receives a check if you lease your car, and if you still owes the money for the car, your lender will be paid first. If the insurance settlement is more than you owe, you will get whatever is left after the loan is paid back.
Yes, if the car is totaled, you still need to pay back the loan or lease. If your insurance payment is less than your loan or lease balance, you will be hooked for the difference.
According to the Kelley Blue Book, most new vehicles lose 20% of their value in the first year. So, especially if you make a small down payment, if the car is totaled at the beginning of the loan, you will be paying a chunk of money after the insurance is settled.
How to cover the gap between insurance payments and loan/lease balances
Below are some ways to protect your finances in the event of a gap.
Gap insurance
Gap Insurance pays the difference if the car is owed a car loan or lease rather than an insurance settlement after it is totaled or stolen. Your collision or comprehensive insurance will pay the actual cash value of your vehicle and deduct the deduction, and gap insurance will help you repay the remaining loan or lease.
Usually, gap insurance is required when leasing a vehicle. Many car dealers offer to sell when they buy a new car. However, you can usually get less coverage from your car insurance company, usually around $20 a year. Triple I say.
New car replacement insurance
New car replacement insurance is an additional option that can be purchased with collisions and comprehensive coverage. Instead of paying the actual cash value of the total car, a policy will be paid with new vehicles of the same make and model with new vehicles replacing the new vehicle. Some insurance companies offer new car replacements and gap insurance in one package.
You can keep your total car, but you will need to notify your insurance company immediately, as storing it will affect your insurance payments. Usually, insurance companies sell total cars for salvage, so if you want to maintain the vehicle, the insurance companies will subtract the rescue value of the vehicle from the settlement payment.
Some total cars can be repaired. Others are beyond the correction. If you want to store and repair your car, let your insurance company know.
Check with your insurance company and check the condition for rules regarding total vehicle ownership. Generally, rescue vehicles cannot be registered and driven on public roads until they have been rebuilt and inspected. In addition, insurance companies cannot provide comprehensive coverage with collisions and vehicles with salvage titles.
The car may be added up even though the car is still operable. Every car is one example. If you want to store your abandoned car, talk to the claim adjuster and learn the next steps you need to take to drive legally.
According to the 2024 LexisNexis Risk Solutions report, you may need to receive your car insurance from less than two weeks to two months. Of consumers who received a total loss claim, 40% said it took at least a month to receive the final payment.
Hiring an attorney can help you get a fair settlement for complex insurance claims, but the potential benefits must be balanced against the costs of legal costs.
Usually, the rate does not increase. This is because they filed a comprehensive claim, such as the vehicle claim that was totaled due to damage caused by storms. And if you file a claim against someone else’s insurance after you cause a crash, your fees won’t rise. File a crash claim for an accident that is your fault may increase your fees.
Amy Danis and Tim Mani edited this article.
