Car accidents are scary. After you’ve determined everyone is safe, your worry is likely whether or not your car is totaled. Let’s start with what totaled means: a car is considered totaled (or a total loss) when the cost to fix it is close to or exceeds the value of the car.
Your auto insurance company will send a claims adjuster to assess the damages. The claims adjuster and repair shop will figure out how much your car is worth and determine the cost of the repairs. Those numbers will help them decide if it’s a total loss or not.
How is a car determined to be totaled?
You know what a total loss is, but what are the specifics of how to determine if a car is totaled? This process depends on many factors, including where you live, the actual cash value of your car, the salvage value, and the cost of repairs.
- Some states have rules about the percentage of cost the repairs can add up to before the car is considered totaled (Nebraska, for example, is 75 percent. This means that if the repairs cost more than 75 percent of the value of the car, it would be considered a total loss. Texas and New Jersey, however, do not have repair cost thresholds.)
- The claims adjuster can calculate the actual cash value of your car by using condition, make, model, mileage and extra features (leather seats, navigation system, remote start, etc.).
- The claims adjuster can calculate the salvage value of your car by determining which parts are still usable and can be salvaged. This can include anything from the tires, to the engine, to the seats. The value of those items is the salvage value.
The insurance adjuster will decide if a car is totaled by adding the cost of repairs plus the salvage value. If that amount is more than the cash value of your car, it is considered totaled.
How does your auto insurance coverage type come into play?
There are different car insurance coverage types, and the type you have will make a difference in how and how much your insurance company pays. If your wreck is with another driver and they are determined to be at fault, their insurance should pay for your totaled vehicle. However, if you are determined to be at fault or the other driver does not have insurance, your auto insurance coverage type matters.
- Comprehensive insurance covers you if your car is totaled by something that is out of your control, such as a natural disaster, a fire or a collision with an animal. It also covers your vehicle if it is stolen and damaged beyond repair.
- Collision insurance covers you if your car is totaled by damage from an accident with another vehicle or running into something, no matter who is at fault.
- Uninsured Motorists insurance takes care of you when a driver who does not have insurance is at fault in the collision that totaled your vehicle. Some states require this type of insurance while other states consider it optional. This insurance type is typically a limited amount, such as $25,000 per accident. Depending on the value of your car, this might not be enough to replace it.
What is the financial impact of a totaled car?
How much does totaling a car cost? First, you have to pay your deductible to the insurance company. A deductible is what you pay out-of-pocket before your insurance coverage starts paying. You get to choose your deductible when picking your insurance plan, with the typical deductible running between $500-$2000.
Anyone who still owes on their car loan might be curious about paying off a car that has been totaled. Typically, the insurance company will take care of sending those funds to the loan holder. If your car is worth more than you owe on the loan, you will receive the difference to put toward a new vehicle.
How much does insurance pay for a totaled car? Your insurance company typically ends up paying the cash value of your car, minus your deductible. The insurance company usually takes ownership of your car through a total car title transfer and then will sell it for salvage after paying you.
What if you want to keep the totaled car? In most cases, yes, insurance companies will allow drivers to buy back the car after it is totaled. You will receive the cash value (minus your deductible) from the insurance settlement and then you will be responsible for using that money to make the repairs and pay off any loans on the car. Some states have certain guidelines about the owner keeping a totaled car, so check with your claims adjuster to find out if this is an option.
There are different rules with each state on how long an insurance company has to decide whether to accept or deny a claim (15-40 days). The company also has to follow laws on how long they have to pay a claim (5-30 days) once a decision on the claim has been made. There is a little bit of leeway since sometimes they are working with other companies.
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