“Total loss” probably isn’t what you want to hear after your car is wrecked in an accident or disaster, but not all is lost. If your car is totaled and there’s insurance coverage, the insurer will pay a lump sum to compensate you for the vehicle instead of paying for repairs.
Here’s what to expect, the type of insurance that comes into play, and how to navigate the process.
Learn more: How does car insurance work? The basics explained.
Some states define a damage threshold for when a car is totaled, such as 75% of the market value. For example, a vehicle worth $10,000 would be totaled if the estimated repair costs exceeded $7,500. In some states, insurers apply their own formulas to determine when a car is a total loss.
No, airbag deployment does not automatically mean a car is totaled. Totaling depends on the vehicle’s value and the cost to fix it. As long as the car can be fixed at less cost than the insurer’s total loss threshold, the insurance company will typically pay for repairs rather than total the vehicle.
Airbag systems are expensive, though, so the cost to replace them can push the total repair bill over the totaling threshold, especially if there was a lot of other damage or it’s an older vehicle that’s lost much of its value.
More than a quarter of car insurance collision claims (27%) were deemed total losses in 2023, up 29% from 2020, according to a LexisNexis Risk Solutions report published in June 2024.
More cars are being totaled because the cost to fix them is rising. All those fancy sensors, cameras, radar units, and other electronic components that make driving easier and safer are expensive, so even minor crashes can cause expensive repairs. Fixing these components requires special equipment and training, making repairs more complex and costly.
The average repair cost for car insurance claims climbed 26% in the past two years, according to the J.D. Power 2024 U.S. Auto Claims Satisfaction Study.
Here are the types of car insurance that can pay for a totaled car, depending on the situation.
Collision insurance pays you the actual cash value of your totaled vehicle after a collision with another vehicle or object, such as a building. A claim payment will be reduced by your deductible.
Comprehensive insurance pays you the actual cash value of your totaled vehicle after damage due to vandalism, hail, floods, and other events. Like collision insurance, a payment will be reduced by your deductible.
The other driver’s property damage liability insurance covers damage to your car in an accident if the other driver was at fault. Their insurance will pay out up to that driver’s policy limit.
Uninsured motorist property damage insurance covers damage to your car if another driver caused the accident but doesn’t have insurance or enough insurance.
Most states require car owners to buy only a minimum amount of liability insurance, and some require uninsured motorist insurance. To fully cover your car, you need collision and comprehensive insurance. Both are optional in every state, although your lender or leasing company will typically require them if you still owe money on the car or are leasing the vehicle.
Read more: Most common types of car insurance explained
After you file a car insurance claim, you’ll also need to get an estimate from a repair shop, unless the vehicle is obviously totaled. If the vehicle may be repairable, the insurance company will send a claims adjuster to assess the damage and estimate the cost of fixing it.
The insurer will determine whether the car is a total loss if it can’t be repaired safely or the estimated cost to fix it comes close to or exceeds what the vehicle was worth at the time of the accident.
Generally, for a total loss claim, the insurance company will pay the actual cash value of the car minus your deductible. The actual cash value is the market value — how much the car could reasonably have sold for — before the damage occurred. If another driver caused the accident, that driver’s liability insurance will pay you the actual cash value of your vehicle, up to their policy’s limit.
Depending on the state and insurance company, you could also make a claim for other costs, such as sales tax and registration fees for a replacement vehicle.
Yes, you can try to negotiate a higher settlement if you think the car was worth more than the insurance company’s offer.
“To do that, you’ll have to submit evidence such as mileage records, service history, and affidavits from mechanics to show that your car was worth more than a typical car of its make and model,” says the Insurance Information Institute (Triple-I).
Insurance companies consult industry databases to determine actual cash value. A variety of companies provide online resources for consumers to research car values, such as J.D. Power and Kelley Blue Book.
You get the insurance check for a totaled car if you owned the vehicle free and clear. Your leasing company usually gets the check if you leased the car, and your lender is paid first if you still owe money on the vehicle. If the insurance settlement is for more than you owe, you’ll get whatever is left after the loan is paid off.
Yes, you still have to pay off the loan or lease if the car is totaled. If the insurance payout is less than your loan or lease balance, you’ll be on the hook for the difference.
Most new vehicles lose 20% of their value in the first year, according to Kelley Blue Book. So you could end up owing a chunk of money after the insurance settlement if the car is totaled in the early years of the loan, especially if you made a small down payment.
How to cover the gap between the insurance payment and the loan/lease balance
Here are a couple of ways to safeguard your finances in case of a gap.
Gap insurance
Gap insurance pays the difference if you owe more on a car loan or lease than the insurance settlement after your car is totaled or stolen. Your collision or comprehensive insurance will pay the actual cash value of the vehicle, minus your deductible, and gap insurance will help pay off the rest of the loan or lease.
Gap insurance is usually required when leasing a vehicle, and many auto dealers offer to sell it when you purchase a new car. But typically, you can get the coverage for less from a car insurance company, usually for about $20 a year, the Triple-I says.
New car replacement insurance
New car replacement insurance is an extra option you can buy with collision and comprehensive coverage. Instead of paying the actual cash value of your totaled car, a policy with new car replacement coverage pays for a new vehicle of the same make and model. Some insurance companies offer new car replacement and gap insurance in one package.
You can keep a totaled car, but keeping it will affect the insurance payout, so you’ll need to inform the insurance company right away. Typically, insurers sell totaled cars for salvage, so if you want to keep the vehicle, the insurance company will deduct the car’s salvage value from the settlement payment.
Some totaled cars can be repaired; others are beyond fixing. Let the insurance company know if you want to keep the car and repair it.
Check with your insurance company and state for rules on owning totaled cars. Generally, salvage vehicles can’t be registered or driven on public roads until they’re rebuilt and inspected. And insurers may not offer collision and comprehensive coverage on vehicles with salvage titles.
Sometimes cars are totaled even though they’re still operable. Hail-damaged cars are one example. If you want to keep a hail-damaged car, talk with your claims adjuster and learn about the required next steps for driving it legally.
It can take anywhere from less than two weeks to more than two months to receive an insurance check for a totaled car, according to the 2024 LexisNexis Risk Solutions report. Among consumers with total loss claims, 40% said it took at least a month to get a final payment.
Hiring a lawyer can help get a fair settlement for a complex insurance claim, but you’ll need to balance that potential gain against the cost of legal fees.
Rates generally don’t go up because you’ve filed a comprehensive claim, like a claim for a car totaled due to storm damage. And your rates won’t go up if you’ve filed a claim against someone else’s insurance after they cause a crash. Your rates may go up if you file a collision claim for an accident that was your fault.
Amy Danise and Tim Manni edited this article.
