What Happens When Your Car Is Totaled? Know Your Options

When your car is totaled, or the car insurance company declares your car as totaled, you will receive the actual cash value of your automobile. You then have the choice to either keep your vehicle, sell it, or allow the insurance company to sell the car as salvage.

If a car is in an accident or experiences a loss such as storm damage, the car insurance company will inspect the vehicle to determine its condition. If the damage exceeds a certain value, the car will be rendered totaled and proceed with payout according to the car’s current market value.

After the insurance company has made its decision to pay the insured according to the policy’s stipulations, the insured can:

Appeal The Settlement

If you do not agree to the settlement amount, you have the option to dispute it. This will most likely be an option for those with upgrades such as after-market parts such as wheels, tires, and audio systems because settlement amounts only figure the current market value of the vehicle’s base model.

Keep The Car For Salvage

One option you have is to keep the car and sell it for parts. Many drivers on the road need the parts of your year, make, and model that weren’t damaged. You could easily post your car on parts sites or salvage the entire vehicle to a dealer.

Sell It To A Junkyard

If you don’t want to go through the hassle of salvaging the vehicle yourself, you could simply contact a junkyard and sell it to them.

Donate Your Car

If your vehicle is running, salvageable, and you have purchased a new vehicle with your claim money and no longer need the old car, you can donate it. Many charities seek running vehicles. You could also use it for a hand-me-down to a family member in need of wheels.

Trade It For Another Car

While this may not always be an option because salvaged vehicles are not always accepted as trade-ins, you could see if you could use it as a down payment on your next vehicle.

Repair The Car Yourself

If you chose to keep the car, you could begin repairs yourself. You would have to check your state’s laws regarding driving a salvaged vehicle. You would most likely need to obtain a salvage title.

What Happens If Insurance Wants To Total My Car But I Want To Keep It?

There may be times when an insurance company wants to total out a car, but you want to keep it. This can be an instance of cosmetic damage such as hail damage or front-end damage when you are nearing the end of your lease.

When the driver can make repairs to the vehicle making it safe to drive, then they can keep their car. How this works is that the insurance company will apply your deductible and subtract the salvage value from the settlement, and you can keep your vehicle.

However, your vehicle will receive a branded title, and you must do the following:

• Still maintain insurance on the vehicle as your state outlines.
• Disclose this to future buyers should you choose to sell it. Failing to do so could place you at risk of legal action.
• Maintain regular maintenance on the vehicle.

What If My Car Is Totaled, But Still Drivable?

If your totaled vehicle is still drivable, it will need to be repaired and then pass inspection before you can take it back on the road. Typically, your insurance company will write you a check for the car’s value minus the salvage value.

In most states, you must obtain a salvage title. Without it, you won’t be able to find auto insurance, much less drive it on the road.

When you do purchase auto insurance, you may be limited on the type of insurance you can get. Since internal damage is difficult to assess, many insurance companies will only issue liability only and will not cover comprehensive or collision

Also, while states allow drivers to drive a car that has been rendered totaled but still drivable, it must be branded and if the owner should sell it, that information must be disclosed to the future driver. Failure to do so could mean a lawsuit against the seller.

Should I Keep A Totaled Car?

It is common for one to want to keep a car after it being rendered totaled. This is especially true if the total moniker is due to cosmetic damage such as hail or a fender bender.

However, should you keep a totaled car, you can experience certain consequences. Here are a few:

Insurance Coverage Difficulties

Being that the vehicle has been in an accident, the vehicle can have a higher rate for this alone. You could also be denied comprehensive and collision coverage.

Difficulty Selling

This can stem from the difficulty of insuring, but also the adversity to risk. Car shoppers would feel worried about hidden body damage and other unknown or undisclosed damage to the automobile.

Passing Inspection

Another risk factor. This time from those who approve vehicles on the road. Just because a car could look pretty on the outside, doesn’t mean it isn’t safe on the inside to be on the road.

Costly Repairs From Hidden Damage

Accidents can cause unseen damage that could cause future issues. One of the reasons they are also difficult to sell. An unseen frame crack that one bump could turn into a break could be costly to a future driver.

What Is A Totaled Car?

During the claims process, at some point, a car insurance company will determine that a vehicle’s damages are more than its worth. At this point, they will consider a car totaled. Each state determines its threshold for a total loss.

Insurance companies have two main types of thresholds, a simple percentage and a total loss formula (TLF)

Simple percentage:

A simple percentage is how much it would cost to repair the vehicle in relation to the actual cost of the car.

Total loss formula (TLF)

This is a comparison between the car’s actual cash value, the sum of repairs the vehicle needs, and what the car would get at salvage in its current condition.

Here is each state’s total loss threshold:

As you can see, each state has its own way of determining its loss ratio. If a driver in Florida has a leased car that they still owe $5000 on and their damages are $4500, their loss ratio is $4000.

After an accident, the car insurance company will pay the lease company $4000, leaving the insured on the hook for the remaining $1000. If the insured has a GAP policy with the lender, they would have the additional coverage. If not, they would be on the hook for the remaining amount.

However, if the car is owned, that same $4000 payment would go to the driver. They could use it to purchase a new vehicle.

What Happens To The Title When A Car Is Totaled?

When a car is rendered as totaled and branded as salvaged, the DMV will issue a salvaged title. It is usually transferred to the insurance company.

As the owner, you can choose to keep your car, but your new title will indicate that the vehicle has experienced a total loss, primarily to protect future buyers should you choose to sell the vehicle.

Keep in mind that being a salvaged vehicle will lower the vehicle’s blue book value, and your rate may be higher.

Who Gets The Insurance Check When A Car Is Totaled?

When a car is totaled, who receives the insurance check would depend on who owns the vehicle. If you are in the middle of a lease, the finance company or the bank that still owns the note will receive the payout. If the check exceeds the balance, you will receive the overage. If you own the car, you will receive the entire payout.

For example, you own a vehicle that is under a lease. You have an accident that renders your vehicle a total loss. When your insurance company inspects your vehicle, they determine your damages are $6500.

However, the market value of your vehicle is $5000. Even though your damages are $6500, they will write you a check for $5000 because that is what the vehicle was worth at the time of the loss.

This check will often go to the lease company, especially if you still owe money on your lease. If you own the vehicle, you will receive the $5000 minus your deductible and any applicable fees. ‘

As we learned earlier, the Gap insurance will pick up the remaining balance due should you owe money to the finance company regardless of the market value of the vehicle.

Keep in mind the total loss formula table above, and each state’s threshold. How much your insurance company pays you for your vehicle weighs heavily on that table as to whether you will owe your car company on a lease.

This is why Gap insurance is important because it would help you pay off what you owe on a lease should your insurance leave an amount due after they pay the lender.