After you are in an accident, the first thing you may wonder is if your car is totaled. A car being totaled means that the cost to repair it far exceeds the value, making it not worth fixing.
When Is a Car Considered Totaled?
First, it is critical to understand that regardless of whether your car is totaled, you must have physical damage for your policy to provide coverage if you are at fault in an accident. Once you determine that your policy will provide coverage, you can drill down into what it takes for a car to be totaled.
A total loss means that the cost of repairs will cost more than the vehicle is worth. Typically, a car will be totaled if the total loss threshold (cost of repairs divided by the actual cash value to get the loss ratio), determined by each state, exceeds a certain amount. Or, sometimes, a car may be totaled if it is just not practical to repair, based on the labor and availability of parts.
For example, the total loss threshold in Maryland is 75%, but it is 80% in Florida.
How To Determine If Your Car Is Totaled
Different insurance companies and state laws and regulations have different criteria for deciding when a car is a total loss and when it can be repaired. Insurance companies use different sources to determine a vehicle’s value, further complicating the situation.
Call your insurance agent to determine what threshold your company uses to determine this. While you can do some research on your own, it is best to get the determination from your insurer. You can get a ballpark idea if you get a repair estimate, but remember that many factors go into calculating a total loss.
Is a Totaled Vehicle Covered By Your Auto Insurance Policy?
Depending on your policy, there may or may not be covered for a totaled vehicle. If you have a “liability only” policy, damage to your vehicle is not covered. If you have physical damage, it could be covered under one of those coverage parts.
Comprehensive insurance provides coverage for what many consider to be “acts of God.” This includes hitting a deer, a hail storm, fire, or glass breakage. Some of these accidents will undoubtedly cause more damage than others which will have the possibility of the car being totaled.
Usually, that would be hitting a deer or larger animal, or if your vehicle is stolen and either never returned or returned in bad condition. Keep in mind that you will have to pay your deductible.
Most of the time, an insurer pays out for a total loss on a car under collision insurance. Collision is coverage for the vehicle when you are at fault. Any accident deemed your fault is considered a collision and can include other cars, trees, mailboxes, or any other item you collide with. The insurer will pay the value of your vehicle if the repairs cost more than said value or are not practical.
Property Damage Liability
If you have an at-fault accident where you collide with any property, the insurer will pay to fix that property up to your chosen limit. Collision coverage will pay for your car’s damage. Property damage liability only pays for the damaged property, not your vehicle.
Uninsured or Underinsured Motorist Property Damage (UMPD/UIMPD)
A driver with no insurance or inadequate coverage is liable for totaling your vehicle if they are at fault. Unfortunately, not all drivers carry enough insurance or any at all. In this case, your Uninsured or Underinsured Motorist Property Damage will pay for the cost of your auto up to the limit on the policy. Keep in mind that if your limit is lower than the value of your car, you will be responsible for the remainder.
What If You Have a Loan on a Totaled Car?
If you still have a loan on the car you were in an accident with and are now totaled, the insurer will send your claim payment directly to the company you have your financing through. They will remove your deductible from the total claim payment.
Typically, when you finance a car, you have given your lender information to your insurer, but if you have not, be sure to have that information handy when you call in your claim.
There could be times when the claim payment is less than what you owe on the car, especially if you currently have negative equity. To ensure you don’t destroy your credit, you should try to pay off the remainder or continue making regular payments. Therefore, looking into gap insurance when financing an auto is always a good idea.
Is Your Car Totaled if the Airbags Deployed?
A common misconception in auto insurance is that your car is automatically totaled if your airbags deploy. This is not always the case. Sometimes, it will be totaled in older cars because airbags can be very expensive to replace, and an older car could be less valuable. However, if it is a newer car, it is not likely to be totaled just from airbags.
What To Do if Your Car Is Totaled
After an accident, make sure you call the police first, as documentation benefits an accident claim. Then, you can begin the process to hopefully have your auto repaired or totaled so you can receive the value of it and purchase a replacement.
- File Claim – If you are involved in an accident, you should file a claim as soon as possible. Most insurers have a claims department that you can call 24/7, or they usually have an online or mobile app option. Whichever is easier for you. Your auto id card, hopefully in your glove box or on your phone, will provide the claims number. You can also perform a quick Google search if needed.
- Damage Assessment – Once your claim is started, an adjuster will come to take a look at your car, or you may be asked to provide photos and a description, and they will assess your damage. Adjusters are vital because they are trained to see things that you might not be able to and know what to look for when it comes to any underlying issues.
- Determine Fair Market Value – The insurer will use their tools to determine the fair market value of your car. Insurers have different methods of calculating the value but usually consider what other cars like yours are worth. And remember, depending on the state, the total loss threshold will determine whether your car is totaled or not.
- Contact Lender – You should contact your lender when your car is in an accident and cannot be driven. They will be expecting payment from your insurance company, and there may be options if you owe more than the car is worth. Contacting them sooner than later is always best.
- Negotiate – You can negotiate a higher payout if you believe the insurance company’s assessment of your car’s ACV is too low. You’ll need to prove that your car is worth more than the insurer offers. You should compile some comparable vehicles and some credible sources that offer market value pricing.
- Receive Payout – The lender will receive the claim payment if your car is financed. If it is not, you will get the fair market value for your car and can then begin the new car buying process. Remember that you will probably not be able to buy a brand new version of your car, but you should be able to make a down payment and purchase something reliable.