Whether A Car Is Totaled Depends On Where You Live
Whether your insurance company declares your car a total loss depends on where you live. New York state considers a car to be a total loss if the repairs total more than 75% of the vehicles current value. If you live in Texas, the same car would only be a total loss if the cost to fix it is at least 100% of its value. Some states, such as Georgia and Illinois, leave the total loss declaration standards up to the insurance company.
What Does Insurance Pay When A Car Is Totaled
How and how much your insurance pays for a totaled car depends on a few factors, including the company and the state you call home.
For example, these are the reimbursement options for a totaled car in Washington State:
- Replace your car with an available and comparable vehicle.
- Offer you a cash settlement based on the actual cash value of comparable cars in your area.
- Offer you a cash settlement based on alternate appraisal methods, like Kelley Blue Book.
How Are You Paid For A Total Loss
The amount you’ll be compensated for a total loss is ACV, the same metric which is used to determine if the car is a total loss. The ACV of the car is determined by its pre-loss market value, less depreciation from when it was new. Ultimately, the ACV of your car will be determined by its wear and tear, and age along with other factors your insurer deems relevant. It is very different from the number you would find on Kelley Blue Book or edmunds.com. Most large insurers have their own method of determining ACV.
Once you agree to the value, the insurer will pay you that amount, if you owned the car. If your car is leased or financed, then the compensation goes back to the leasing or financing company.
If you total a leased or financed car, there is a good chance there is a decent amount left to pay. While the insurance company will pay you for the value of the car, it is very likely the value has depreciated, and does not reflect the value of the car, which you took a lease for. If you drive a leased vehicle, you should consider taking out gap insurance, which would cover you for any remaining balance in a lease.
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How Does Gap Insurance Work After A Car Is Totaled
Keep in mind, there is such a thing as still owing money to your lender after you receive payment from the insurance company. Why? Because the insurer is only obligated to pay you for the fair market value of your car, and sometimes when youre financing a car, youll owe more money on it than its actually worth. This is called being upside-down, and its why you should have auto lease or loan gap coverage.
Gap coverage is an additional auto coverage you can add to your auto policy so, in the event youre upside-down when your car is totaled, itll help pay for the gap between what your car is worth and what you still owe to your lender, subject to any applicable coverage limits. At American Family Insurance, the maximum payout for gap coverage is equal to 25 percent of your vehicles actual cash value. So, if your cars ACV is $4,000, youll have an extra $1,000 in gap coverage with this added protection in place.
Another important detail about this coverage is that the loan must be a vehicle loan and be taken out only to purchase the vehicle. So, if you used a home equity loan to purchase a vehicle, this coverage would not be available. Additionally, it doesnt pay for items such as extended warranties, credit life insurance, loan rollover balances or late payment penalties and fees.
What Insurance Covers A Totaled Car
The type of insurance coverage that kicks in if your car is totaled depends on the circumstances of the loss. Here are four kinds that might cover a total loss.
- Collision: Kicks in if youre in a crash with another car or immovable object, such as a fence or lamppost. Read our story on collision insurance.
- Comprehensive: Covers non-crash-related damage caused by many different things, including severe weather, vandalism, theft, animals, and more.
- Property damage liability: If youre in an accident and another driver is at-fault, their property damage liability coverage should pay for the damage to your vehicle if theyre insured.
- Uninsured/underinsured motorist: Your uninsured/underinsured motorist property damage liability should cover you if youre in an accident where the at-fault driver is not insured. If you dont have this type of coverage but have a collision, it will pay for the repairs.
If you have a loan or lease, the lender will probably require you to maintain collision and comprehensive. Otherwise, these coverages are optional in every state.
You could skip them, but if you only have liability coverage to meet your states minimum insurance requirements, youre putting yourself at risk. Liability coverage only pays for injuries and damage you cause to someone else. It wont cover repairs to your vehicle if youre at fault in an accident or have non-crash-related damage.
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How Does The Insurance Company Determine The Value Of A Totaled Car
Adjusters use comparables in the area to help determine the ACV or the car’s actual cash value. An important fact to keep in mind is that the ACV is the car’s value just before the crash. Damages from the crash are not included in the total.
Other factors and determine the value include to make, model, year, and condition of the car before the crash.
What If The At
According to California law, it is illegal to drive without having at least $15,000 of death or bodily injury insurance per person, $30,000 for the total death or bodily injury insurance for all involved parties, and $5,000 of property damage insurance. However, California does not require all drivers to have uninsured motorist coverage, which comes into effect if the driver at fault is uninsured or if their insurance policy does not cover all of the damages. California law does require all insurance companies to offer this type of insurance to drivers, and it is highly recommended that individuals purchase this insurance in order to protect themselves against accidents with uninsured motorists.
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If You Don’t Have Insurance
Driving without insurance or other proof of financial ability is illegal in most states. And you typically can’t get a car loan without insurance. If you do total your financed car in an accident while you don’t have car insurance, you will have to continue to make loan payments until your loan is paid off. You will also have to pay for all accident-related expenses out of pocket. If the accident involves another driver or someone else’s property, you might get sued. You can also lose your driver’s license and face a hefty fine for driving without insurance.
Does Insurance Cover A Totaled Car
If an insurer totals your car, it’s typically covered by two parts of your policy: comprehensive coverage and collision coverage. When you have a car loan or lease, those two types of coverage normally are required. They aren’t legal requirements on a car you’ve paid off, howeverthe decision to carry comprehensive or collision coverage is up to you. Without coverage beyond the liability insurance that’s required in almost every state, you might have to pay out of pocket to replace your totaled car .
Comprehensive insurance covers damage or disasters not related to a collision. Meanwhile, collision insurance applies when your car is damaged during a crash with another car, an object or property.
In some cases, an insurer might not cover a claim when your car is a total loss. Here are five possible reasons for your claim being denied:
Take note that each insurance company uses different criteria for declaring that a car is a total loss. However, a car that’s totaled by one insurer probably would be totaled by another.
Here are three things to keep in mind regarding a claim for a totaled car:
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If My Car Is Totaled Do I Have To Pay Off The Loan
Okay, youve accepted that your car is a total loss. But what if theres still a loan on the vehicle? Are you responsible for paying the balance?
What happens when a car is totaled with a loan is typically your insurance company or the at-fault drivers insurance company will cut a check for your cars actual cash value less any applicable deductibles. Lets suppose you owe $10,000 on your auto loan and your car is valued at $12,000. Your claims adjuster will pay $10,000 to the lender and the remaining $2,000 will be issued to you.
How To File An Insurance Claim If Your Car Is Totaled
If youre involved in an auto accident, regardless of fault, and your car is damaged, immediately notify your agent or insurance company. At Progressive, were available 24/7 to report a claim over the phone or online. Remember, its up to the insurance adjuster to determine whether your car is totaled or if it can be repaired.
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Should You Remove Your Totaled Vehicle From Your Insurance Policy
Yes, but please wait to remove the vehicle until:
When you’re ready, you can remove the vehicle online in our Policyholder Service Center.
This material is intended for general information only. It does not expand coverage beyond the policy contract. Please refer to your policy contract for any specific information or questions on applicability of coverage.
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How Is Your Totaled Vehicle Covered On Your Policy
If another driver is at fault in the accident, their insurance pays you the value of your totaled vehicle with the at-fault drivers property damage liability coverage. If your vehicle is damaged in any way or you were hit by a driver without insurance, the coverages below can protect against a totaled vehicle on YOUR insurance policy:
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What If Your Totaled Car Value Is Less Than You Owe On It
If the check isnt enough to pay the entire balance due on your loan, you will still owe your lender the difference.
Gap insurance can protect you in this case its meant to cover the difference between what an owner owes on a car and the market value. Otherwise, you may have to make payments on a car you no longer have.
In some cases, the insurance company may issue the check to both you and the lienholder. When that happens, call your lienholder to find out how the funds will be disbursed.
What If I Still Owe Money On A Total Loss Vehicle
If the insurer says that your car is a total loss, it will only pay you the fair market value of your car as of the day of the accident. Unfortunately, an insurer is only required to pay damages up to the fair market value of the destroyed property, even if you owe more than the car’s value on your car loan. Let’s look at an example of how this happens.
Let’s say that, on the day that the car was totaled, you owed $14,500 on your car loan, but that the current fair market value of your car was only $12,000. The insurer is only going to pay you $12,000 toward the value of the car, leaving you with $2,500 to pay on your car loan, even though you no longer have a car. Learn more about what happens when you still owe money on a totaled car.
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How Do You Determine If Your Car Is Totaled
A total loss in car insurance is a term insurers use when the cost to repair your car is more than the value of the vehicle. Your insurance company will typically complete an inspection of the damaged vehicle before officially declaring it a total loss.
When assessing your vehicle, most insurers factor in the condition and structure of your car in addition to any state laws. In some states, a vehicle is automatically deemed to be a total loss if the cost to repair it exceeds a certain percentage of the vehicles worth.
Can I Buy Back My Totaled Car
Many insurers will allow you to buy back a vehicle thats been totaled out if you want to repair it and make it roadworthy again. If youre wondering how do I buy back my totaled car? youre best to get in contact with your claims representative. But you should be aware that you may have to pay out of pocket to cover the cost.
Minus your deductible, youll be given the actual cash value of the vehicle, but if you still owe money on the loan, you may need to pay the balance in order to get the title transferred over to you from your lender.
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What Happens If You Owe More On Your Loan Or Lease Than Insurance Pays Out
The insurance company wants to know if you have a loan or if the car is leased. Then they will want to know if its a loan, how much do you owe, Miller says. Thats because you might owe on the vehicle more than the carrier pays out, or you might not be current with payments on your car loan.
If you havent made payments, or are upside down or late, now there is a gap what you owe and what youre getting paid, Miller says. You are responsible for the shortfall, but if you have gap insurance with your auto policy, this is where it kicks in.
Gap insurance bridges the difference between what you owe and the amount of the payout from the insurance carrier. If you dont have this optional coverage in your policy, then you need to come up with the rest.
What Happens If You Keep Your Totaled Car
If you keep your car after the actual cash value, sales tax and applicable prorated taxes and fees are added together, the insurer deducts the salvage value from the total amount of the settlement. The insurer must report your totaled auto to the Washington state Department of Licensing .
If you have questions about what happens next with your totaled car, contact the:
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Is My Car Totaled
Your insurance provider will tell you if your car is totaled or not. If youd like to get a sense for what your insurer might say in this situation, answer these questions:
- Can you drive the vehicle?
- How much will it cost you to repair the vehicle?
If your car wont start, and especially if it wont drive, its more likely that your insurer may declare it totaled.
And if a mechanic or similar specialist estimates repair costs to be higher than the Kelley Blue Book value of your car, its also more likely to be a total loss.
What Happens If The Insurance Payment Isnt Enough To Pay Off Your Loan
Gap insurance, also known as “loan/lease payoff coverage,” covers the difference between what you owe on the vehicle and the vehicles actual worth. Progressives gap insurance will cover up to a maximum of 25% of the actual cash value of your car.
For example: Your insurer determines the actual cash value of your totaled car was $35,000. However, you owe $37,500 on your car loan. Your loan/lease payoff coverage takes care of the extra $2,500. Without gap insurance, youre responsible for the $2, 500 balance left on your loan.
Gap coverage can cover the difference between what you owe on the vehicle and the vehicles actual worth.
Keep in mind, new car owners may be most susceptible to the situation above. Newer vehicles typically depreciate as soon as you drive the vehicle home from the dealership.
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Option : Donate The Car
Donating a totaled vehicle to a nonprofit organization is another option. There are a number of charities that accept vehicle donations, including cars that have been totaled, to support their operations.
An added benefit of donating a totaled vehicle to charity is that you may be able to claim it as a tax deduction. If the nonprofit you donate your vehicle to sells it for less than $500, you can deduct the lesser of $500 or the fair market value of the car on the date that you donated it. If your donated vehicle is sold for more than $500, you can claim the amount for which it was sold.
To support your tax deduction, be sure to get a receipt showing the date of your donation and the name of the nonprofit organization.
Some car dealers will take a totaled vehicle as a trade-in.
