A car is considered totaled when its total value is less than what it costs to repair it. Note that this may vary from state to state and from insurer to insurer.
For example, in Alabama a car is considered totaled when the damage is greater than 75 percent of its value.
How Does My Insurance Determine if a Car Should be Totaled?
Your insurance company will ask the following questions before giving you a verdict:
- Can the car be repaired safely?
- Will repair costs be higher than the car’s value?
- Will state law determine that the car is damaged enough for it to be considered totaled?
If your car’s airbags deployed during the accident and your car is totaled, your insurer will take into account the cost of replacing the airbags before making a decision.
What to Do When Your Car is Totaled
The first thing that you should do when your car is involved in a severe accident is contact your insurance company. Your insurance agent should help you initiate an insurance claim, wherein the insurance company will value the car based on the repair costs involved.
If your insurance determines that your car is totaled, they will issue payment for the cash value of the car. This will be done after considering the deductibles on the comprehensive or collision coverage.
How Much Will My Insurance Pay Me for a Totaled Car?
The value of a totaled car will be determined by your car’s worth at the time of the accident. The insurance company will use several factors, such as age, depreciation, mileage, and resale value, to come up with this figure. This may also be compared to the selling price of similar vehicles in the area and/or the fair market value.
Once the insurance pays you for the value of your totaled car, they will resume ownership of it. The cash can be given to you once all the necessary procedures have been completed.
Alternatively, you can ask your insurer to replace the car with one that is of comparable value. This is most applicable when the totaled car is still new, and the insurance company determines that there was no mistake on your part.
What if the Totaled Car Has an Outstanding Loan Balance?
If you were still paying a loan on the totaled car at the time of the accident, you will still be required to clear the outstanding debt. You can ask the insurance company to write a check to the lender to settle the balance, though. Typically, the lender will receive the first payment and the balance will be credited to your account.
In some instances, you may find that you still owe the lender after they have been paid by your insurance. This happens when the loan interest is high, and the insurance payout is low. If this happens to you, you will have to clear the outstanding amount out of pocket.
What if the Damage is not My Fault?
If, for example, a tree falls on car when it is safely parked and it gets totaled, one could argue that you are not to blame. In this case, your insurance company will reimburse the complete value of your car or get you a replacement. Again, the reimbursement will be made after taking any deductibles into account.
If your car is totaled in a collision that was not your fault, your insurer may seek reimbursement from the other driver’s insurer to cover the compensation cost.
Can I Keep My Car and Repair it Myself?
Most insurance companies will allow you to keep your totaled car if you want to. They will get a fair estimate for the totaled car and deduct this amount from the reimbursement that you were supposed to receive as a settlement.