How Much Will Your Insurance Pay for a Totaled Car?
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Written byMandy Sleight
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Mandy Sleight has over 15 years of insurance knowledge and expertise in auto, home, life, health, pet, supplemental benefits, and other insurance products. She’s a sought-after insurance expert, appearing in Bankrate.com, Moneygeek.com, U.S. News & World Report, Reviews.com, CNET, and other publications, and she's been writing for Compare.com since 2023.
Mandy uses her background and experience working for well-known insurance companies like State Farm and Nationwide Insurance to create engaging and easy-to-understand content that helps readers make smarter insurance choices that have a positive effect on their budgets and finances.
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Edited byLequita Westbrooks
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Lequita WestbrooksSenior Editor
Lequita Westbrooks is an insurance editor at Compare.com. Her writing and editing experiences span several industries, including insurance, personal finance, higher education, and more. She excels at explaining complex topics like auto insurance in simple, easy-to-understand language and is passionate about helping readers save money. Lequita graduated from the University of South Florida, where she earned her Bachelor’s degree in English.
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How much your car insurance company will pay for a totaled vehicle depends on several factors, including your car’s value and the type of coverage you have. Knowing how insurers value a vehicle to determine if it’s totaled makes it easier to understand the insurance payout amount and whether you’re getting the best deal.
Keep reading to learn how auto insurers calculate your vehicle’s value, how insurance payouts work, and which insurance coverages will pay for your totaled car.
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How Car Insurance Companies Determine If Your Vehicle Is Totaled
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Insurance companies determine your car’s value based on its age, make, model, pre-accident condition, mileage, and repair costs. The value of the car creates the threshold, or dollar amount, for deciding whether to fix or total your vehicle.
If the damage is worth fixing, the insurer will pay to fix it. If not, it’ll total the car and pay you its current value. Then, the insurance company will sell it to a salvage yard or at auction.
Let’s take a closer look at how car insurance companies calculate your vehicle’s value.
How car insurers calculate a total loss
Car insurers use something called a “total loss formula” in most states to determine the dollar amount it will take to total your vehicle. Insurers use several factors to calculate the formula, including:
Fair market value (FMV): Your vehicle’s fair market value — also called actual cash value (ACV) — before the car accident
Repair value: The cost of repairs to fix your vehicle back to its pre-accident condition
Salvage value: How much a scrapyard would pay for your damaged car
Total loss formula: The insurance company will declare your car a “total loss” if the repair value is equal to or greater than its ACV minus its salvage value
Let’s say your car’s value is $20,000 before the accident, and its salvage value is $4,000, leaving a total loss threshold of $16,000. If the repair costs equal or exceed $16,000, your insurer will total your car and pay you its value ($16,000), then sell it to a junkyard for parts to recoup some of its loss ($4,000).
How Much Will Your Insurance Company Pay Out for Your Totaled Car?
If you total your car, the most your insurance company will pay is the fair market value of the vehicle before the accident. Your insurer will also factor in your deductible and any other insurance fees that apply. If you finance or lease your car, the insurance company will pay your lender or leasing company first. Then, you’ll get any remaining balance.
For example, let’s say your car’s value is $15,000, you have a $1,000 deductible, and you still owe the bank $6,000 in loan payments. After you pay your deductible, the insurer will pay the bank $6,000 out of the $14,000 settlement offer, and you’ll get the remaining $8,000.
If you feel the insurance company’s settlement offer is too low, you can negotiate.
Can you negotiate your payout for a totaled car?
When an accident leaves you with a severely damaged vehicle, it’s a good idea to look up its book value. Doing so can ensure you get a fair settlement amount by laying the groundwork for negotiating your insurance payout.
Websites like Edmunds and Kelley Blue Book (KBB) use real-world data from used-car sales to help you determine your vehicle’s current market value. You can enter your car’s year, make, model, VIN, features, and condition into the website’s calculator to determine the vehicle’s value, which can help you negotiate a higher payout.
Auto Insurance Coverage Types and How They Work for Totaled Cars
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Understanding how different coverages work for totaled vehicles is vital to ensuring you have the right coverage to get the most out of your auto policy. Here are the five coverage types that could pay for a totaled car:
Collision pays if you collide with another vehicle or stationary object or have a single-vehicle rollover, no matter who’s at fault. A deductible usually applies, which will lower your insurance payout.
Comprehensive pays for non-collision claims, such as hitting a deer, damage from severe weather like hail, or a tree falling on your vehicle. A deductible also typically applies.
The other driver’s property damage liability pays up to the policy limit when they’re at fault for causing damage to your car.
Uninsured/underinsured motorist property damage pays if someone hits your car but doesn’t have car insurance or enough to cover the claim. It also covers hit-and-run accidents. A deductible may apply and is usually state-specific.
Gap insurance can pay the difference between your settlement amount and the remaining balance on your auto loan or lease.
An accident can happen at any time. If you don’t have the right type of insurance coverage, you could end up paying the full cost of a new vehicle. Some insurers offer optional new car replacement coverage, which pays to replace your totaled vehicle with a brand-new car of the same make and model.
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Understanding the Claims Process for Totaled Cars
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Getting into an accident can be stressful. Don’t wait until then to figure out how the claims process works, especially if you think your car is totaled. Here’s how the process typically works:
File an insurance claim. After the accident, file a claim with the other person’s insurance company or yours, depending on who’s at fault and what coverages you have.
Assess the damage. The insurance adjuster will inspect your vehicle and get an estimate from the body shop on the cost of repairs. They’ll also calculate the car’s value.
Determine whether the vehicle is fixable or totaled. The insurer will compare the car’s fair market value and the estimate to see if it’s fixable. If it reaches the total loss threshold in your state, the insurer will declare the vehicle totaled.
The insurance company makes a settlement offer. The company will offer an insurance payout if the car is totaled or money to fix it if it’s repairable.
Totaled Car FAQs
Here are answers to the most common questions about how insurance works after you total your car.
How much is a totaled car worth?
It depends. Car insurers base a totaled car’s value on its pre-accident market value. The actual cash value of your car depends on the vehicle’s make, model, age, and condition before an auto accident.
Do you still have to pay insurance if your car is totaled?
It depends on how fast you plan to replace your car and if you have loyalty discounts on your insurance policy. Keeping your current policy active allows you to easily add a replacement vehicle, avoid a coverage gap, and maintain your loyalty status with a discounted rate.
Can you keep your totaled car?
Yes, you can keep your totaled car if your state allows it (some states don’t). If your state does, the insurance company will pay you the vehicle’s actual cash value minus the car’s salvage value and any applicable fees or deductible. If you plan to keep your vehicle, you should let your insurer know ASAP. Usually, your car will have a salvage title after being totaled, so it won’t be possible to drive it until it’s fixed and cleared by the DMV.
What happens if your car is totaled and you’re not at fault?
If you’re not at fault for the accident, you should file a claim with the at-fault driver’s insurance company. But if another driver isn’t involved — for example, if a weather-related event totals your car — you can file a comprehensive claim with your auto insurance company.
Sources:
NOLO, “The Insurance Company Says My Car Is a Total Loss. What Now?,” accessed July 24, 2024.
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Mandy SleightInsurance Writer
Mandy Sleight has over 15 years of insurance knowledge and expertise in auto, home, life, health, pet, supplemental benefits, and other insurance products. She’s a sought-after insurance expert, appearing in Bankrate.com, Moneygeek.com, U.S. News & World Report, Reviews.com, CNET, and other publications, and she's been writing for Compare.com since 2023.
Mandy uses her background and experience working for well-known insurance companies like State Farm and Nationwide Insurance to create engaging and easy-to-understand content that helps readers make smarter insurance choices that have a positive effect on their budgets and finances.
Lequita WestbrooksSenior Editor
Lequita Westbrooks is an insurance editor at Compare.com. Her writing and editing experiences span several industries, including insurance, personal finance, higher education, and more. She excels at explaining complex topics like auto insurance in simple, easy-to-understand language and is passionate about helping readers save money. Lequita graduated from the University of South Florida, where she earned her Bachelor’s degree in English.