Have you ever had your car totaled in a wreck and wondered how much you’d get from insurance? It’s a head-scratcher for sure! Right, but what exactly is a totaled car?
When your car is declared “totaled,” it indicates that the cost of repairs is higher than the vehicle’s worth. In other words, the damage is so bad that it would take more money to fix than the car is worth.
Now, when it comes to insurance, they determine how much they’ll pay based on factors like your car’s age, condition, and market value. Nevertheless, if that seems difficult, do not worry! I’ll get into the specifics of insurance payments for totaled cars in this article.
I’ll also take you step-by-step through the procedure so you will know exactly what to anticipate in case you ever find yourself in a tight spot. So take a breather, and let’s break it down in plain and simple terms.
What is the value of your totaled car?
To get an idea of what your totaled car is worth, find the Kelley Blue Book value for it in fair condition. See if the fair condition value is in the range of 20 to 40 percent. If your car has sustained damage, Car Brain estimates that the percentage will probably be closer to 20 percent. This helps you determine the approximate value of your totaled car.
That being said, you should be aware that there is no exact way to figure out how much your totaled car is worth. Adjusters have the final say on this, though it might be up for debate, but not entirely.
Upon filing an accident report, your insurance company will send an adjuster. Your vehicle’s damages will be evaluated by them to decide if it will be deemed a total loss. When determining the value of an item that has been totaled, consideration will be given to its state just before the accident.
A third-party appraiser will also be consulted to guarantee, and make sure that the price offered is reasonable. When determining the value of your car, the insurance provider will take into account the actual cash value provided by both adjusters.
The price at which your car could be sold before it was seriously damaged in an accident is known as its actual cash value, or ACV.
Your car’s actual cash value is likely to be lower than how much your car is currently being sold at the market because your adjuster will factor in the amount of depreciation into your damaged car.
The insurance provider will look up recent sales of comparable cars in your neighborhood and contrast them with the listings that are currently available to determine the ACV of your vehicle. The trim level, options, mileage, and pre-accident condition of your car will also be taken into account when calculating the ACV.
It is important to remember that the insurance company will deduct your deductible from the amount they pay for your totaled car.
Following the determination of the ACV, you should normally receive payment for your totaled car within a few days. You might not be compensated for your totaled car in one of two situations:
- If it is leased
- If you have a loan
The insurance company will cover the amount owed to your loan provider. You receive the remaining portion if anything remains. It is the same if your vehicle was leased. To ascertain when you can anticipate payment, speak with your adjuster.
Read: How Do Insurance Companies Value Cars?
What to do when settlement for your totaled car isn’t enough?
Having the appropriate insurance coverage is necessary for your car to be covered when it is totaled in an accident. It is advised to add GAP insurance to your policy if you want the difference between what your car is worth and what the insurance company will pay out if it is totaled.
Your insurance will pay you for the actual cash value or ACV of your damaged car, which is far less than the amount you bought your car and the amount you still owe on your car loan.
Some people end up paying the compensation they receive from the ACV to their lenders, and are left with a couple of dollars to pay out of pocket to cover the remaining car loan.
They keep paying for the outstanding car loan even when they can no longer use the car. After you pay the lender the ACV from your insurer, GAP insurance settles the remaining loan balance.
Guaranteed Auto Protection, or GAP for short, is a valuable insurance to have if you owe more on your car loan than what your insurer would compensate you with. Regretfully, in the unfortunate event that your car is totaled, the money from this kind of coverage goes straight to the lender, and you will never see it again.
By doing this, you will be able to avoid having to pay for an automobile that you no longer own, as GAP insurance covers the difference between your outstanding car loan and your insurance settlement.
Certain insurance providers, provide replacement coverage that is guaranteed. You will not have to worry about the payout amount for a totaled car if you have this kind of coverage, even though some providers will replace your vehicle if it is less than three years old. There will be coverage for your new vehicle.
Nevertheless, insurance companies have to “financially cover you during car accidents” even if you do not have replacement coverage guaranteed. This implies that they are required to reimburse you for the ACV of the totaled car, minus the deductible.
In the event of a totaled car, what happens?
In the event that your car is totaled, the insurance company will normally offer you a settlement based on the car’s value. Your insurance check will be reduced by the amount of your deductible if you are filing a claim on your own collision or comprehensive policy.
An illustration of how an insurance claim for a totaled vehicle might proceed is provided below:
- Following a collision, you report the incident to your insurance company under the collision coverage section.
- After examining the car, a claims adjuster applies your state’s total loss method to determine that it is a total loss.
- After deducting the amount of your collision insurance deductible from the value of your car, your insurance company makes a settlement offer.
- A settlement check for the remaining amount owed on any loans or leases will be sent to your lender or leasing company.
- You will be the one receiving the settlement check if you do not have a lease or loan.
Related: How Does Car Insurance Deductible Work?
How much will insurance pay for my totaled car?
Your car insurance deductible is deducted from the amount your insurance company pays, which is the amount it believes the vehicle was worth just before the collision.
The make, model, mileage, sales price of comparable vehicles in the area, the vehicle’s pre-loss condition, and its salvage value are all factors considered by an insurer.
Consider a scenario in which the total value of your car was $10,000. Presented below are two situations:
- With a $500 deductible, you are filing a claim on your personal collision or comprehensive insurance. After removing your deductible from the $10,000, the company will give you $9,500. In the event that you financed your car, the lender receives payment for the amount owed on the car.
- You are pursuing legal action against the party you believe caused the accident. You will receive $10,000 from their insurance provider. There is no deduction for claims made against another person’s insurance.
Additional choices for handling a total loss Vehicle
Hold onto your totaled vehicle
Depending on your state, you might be able to keep a totaled automobile. “Owner-retained salvage” is permitted in certain states. Should you decide to keep the car, a salvage title will be issued. You must adhere to your state’s repair requirements if you wish to get your vehicle legally roadworthy.
In most cases, this entails having the automobile fixed and restored before undergoing an inspection authorized by the state to make sure it satisfies safety regulations. You will receive a “rebuilt title” if your vehicle passes the inspection.
However, obtaining auto insurance for a vehicle with a rebuilt title might present some challenges. Automobile insurance providers see vehicles with a history of salvage titles as more risky to insure. Certain auto insurance providers will not provide any coverage at all or will only provide optional coverages (such as comprehensive and collision).
Have a junkyard buy the car
Selling a totaled car to a junkyard requires you to have the title and ownership documentation for the car. This is very important. It might also be a good idea to shop around and compare the offers you receive from different junkyards for the car. The amount will be determined by looking at the car’s make, model, and condition.
It might be necessary for you to report the sale to your state. In this manner, you will be covered in the event that someone drives your old car and is involved in an accident.
Donate the car to a good cause
A salvage title car frequently qualifies for a tax deduction when donated to a charitable organization. It could also be towed away for free by charitable organizations.
The amount your insurance will pay for your totaled car depends on many variables, such as the specifics of your policy, the car’s current market value, the amount of your deductible, and any additional coverage you may have, like gap insurance. In most cases, your car’s actual cash value (ACV) at the time of the accident will be covered by your insurance, less any applicable deductibles.
What is left over after your car loan balance is deducted from your ACV is covered if you have gap insurance.
It is important to thoroughly read your insurance policy and get in touch with your insurance company to guarantee that the amount of compensation for your totaled car is understood and accurate.
