What Happens When Your Car Is Totaled?

"Totaled" does not always mean the car is destroyed. It means the insurer has decided that fixing it does not make financial sense. Here is how that decision is made and what you can do about it.

How insurers decide a car is totaled

Insurers compare the repair estimate with the car's actual cash value (ACV), its market value just before the crash. States use one of two approaches (GEICO):

• Total loss threshold: the car is totaled if repairs exceed a set percentage of ACV. The percentage is set by state law and varies by state.
• Total loss formula: the car is totaled if repair cost plus salvage value equals or exceeds ACV.

Hidden damage found during repairs can turn a repairable car into a total loss later.

How the payout is calculated

The insurer pays ACV, minus your deductible if you are claiming on your own collision coverage. If the other driver's insurer pays, there is no deductible. Many states also require the insurer to include sales tax and title fees in a total loss payment. ACV is usually based on a valuation report using similar cars sold or listed in your area, adjusted for mileage, options and condition.

If you still owe money on the car

The check goes to your lender first. If the loan balance is higher than ACV, you owe the difference unless you have gap insurance, which covers that shortfall. Keep making loan payments until the payoff is confirmed, or your credit can suffer.

How to challenge a low valuation

1. Ask for the full valuation report.
2. Check for errors: wrong trim, missing options, wrong mileage, or comparables from far away.
3. Gather your own comparables: listings for the same year, make, model and similar mileage nearby.
4. Provide receipts for recent major work such as new tires or a new transmission.
5. Send a written counteroffer.
6. If you still disagree, check your policy's appraisal clause, which lets each side hire an appraiser, or file a complaint with your state insurance department.

Keeping the car

In many states you can keep a totaled car. The insurer deducts its salvage value from your payment, and the car gets a salvage title. It must be repaired and inspected before it can get a rebuilt title and go back on the road, and some insurers will not offer full coverage on rebuilt-title cars.

Other costs to claim

If the other driver was at fault, their insurer should also cover a reasonable rental car period, towing and storage, and personal items damaged in the crash. Injuries are a separate claim; see what to do after a car accident and who pays when an accident is not your fault.

If the insurer refuses to pay fairly, see what to do if your insurance claim is denied or talk to a personal injury lawyer if injuries were involved.

Sources

1. GEICO: Totaled car, what it means and how insurers determine it
2. Complete Markets: What are your options after your car is totaled?
3. Cornell Law School LII: Damages