Totaled car insurance guide: What you need to know about a total loss

What is a totaled car?

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A totaled car has sustained damage to the point where fixing it is more expensive than replacing it. However, not all totaled cars are undrivable. Superficial hail damage won’t affect a vehicle’s drivability, but repairing it may be prohibitively expensive. In some cases, it’s the technology that causes a car to be totaled.

“There is an increase in totaled vehicles these days because so many of the components on the car are very costly to replace. For example, many modern car bumpers now contain sensors and cameras, so it's not just replacing this simple component any longer; the onboard technology needs to also be replaced and calibrated,” says Kathleen Long, CRO at Repair Pal, a consumer auto repair resource.

While it's possible to retain a totaled car if the damage isn’t severe, selling the vehicle later can be problematic, as it will require a rebuilt or salvage title. That will significantly reduce the resale value and make it less appealing to potential buyers.

When is a car considered totaled?

State law determines the threshold for totaling a vehicle based on how much it will cost to repair. Typically, this ranges from 50% to 100% of its pre-crash value. However, insurance companies may declare a vehicle totaled even if the damage is less extensive.

“Nearly any time any major mechanical repair is involved in the repairs needed, the car will be totaled as opposed to repaired, as this almost always represents a significant increase in cost for the insurer,” Long says.

Your carrierAn insurance carrier is the company that provides your car insurance policy and pays claims. may decide your damaged car is a total loss if:

It can't be repaired safely.
Repairs would cost more than the car is worth.
It meets your state's total loss threshold. Many states use a total loss formula (TLF), whereby the cost of repairs plus the car's scrap value must equal or exceed the car's pre-accident value.

Choose your state below to see the total loss threshold laws.

Total loss threshold and laws by state

Rule	What you should know
75%	The vehicle is considered a total loss if the damage is greater than 75% of its fair retail value prior to damage.Â

*Fair market valueThe price at which property would change hands between a willing buyer and a willing seller, where both parties have reasonable knowledge of the relevant facts and neither party is under any compulsion to buy or sell.

**National Automobile Dealers Association

How does insurance determine if a car is totaled?

Your  insurance adjusterAn adjuster handles claims for the insurance company. They assess the damage and determine how your coverage applies to damages and injuries. will determine if the car is totaled by noting the mileage and the condition of the exterior, interior and tires, as well as any aftermarket parts or custom equipment you've added. Then, based on the pre-crash condition of your car, your adjuster will find similar models for sale in your area and establish the total loss estimate on these comparable cars. This is called the actual cash valueActual Cash Value (ACV) is the current market value of your car, considering depreciation. It's the amount your insurance will pay if your car is totaled or stolen. (ACV) of your vehicle.

This amount will then be compared to the estimated cost of repairs to determine if the vehicle is a total loss.

How is your totaled vehicle covered on your policy?

If your vehicle was damaged in an accident caused by another driver, that driver’s liability insurance will cover the damage to your car. However, you will need collision insurance if the damage resulted from an at-fault accident and comprehensive insurance for losses caused by something other than a crash, such as theft, flooding or hitting a deer.

Drivers with minimum coverage must pay for a vehicle replacement out of pocket because their insurance doesn’t include collision and comprehensive coverage.

Can you dispute a total loss decision?

Yes, you can negotiate a total loss decision, both the decision to total the car and its actual cash value. Here's how:

Request a copy of the valuation report
Provide your own evidence of the car's value, including comparable vehicles
Provide any evidence that would increase your car's value, like upgrades
Get an independent appraisal, if necessary

What happens to your car's title after a total loss?

There are two options for the car's title after a total loss:

You accept the total loss settlement and sign the title over to the insurance company, which will then sell the vehicle for its salvage value.
You keep the vehicle and the salvage value is subtracted from the settlement, in which case you will need to apply for a salvage title.

Once you have signed over the title to the insurance company, you are no longer responsible for insuring the vehicle.

How can I get a new car after a total loss?

If your insurer decides the car is totaled, it will issue a settlement for its fair market value, which is determined by factors such as age, model, make, and condition, minus your deductible. While the settlement probably won’t cover the full cost of a new car, you can use it to offset the expense.

Keep in mind that if you have a car loan, your settlement will go to pay the loan off first. You’ll need to check with your lender to see if you have a balance due and must pay off the loan before buying a new car. Many lenders require car owners to carry gap insurance because the actual cash value of a vehicle may be less than what you owe on the loan. Gap coverage will pay the difference between what you owe and the insurance settlement if your car is a total loss.

“One thing car owners can do to make sure they are better protected by their insurance is to make sure that they have coverage which will pay off their existing loan and adequately cover the cost of a new vehicle, as this is going to ensure they aren't left with no car and a remaining car loan debt in the event a collision occurs,” Long says.

FAQ: Totaled car insurance

Is it better to have a car totaled or repaired?

If your vehicle has significant damage, it may be better to have it totaled. Although totaling a car requires finding a replacement, repair costs and possible safety issues may make keeping your totaled vehicle problematic. Additionally, insuring a totaled car may be more challenging, and you may not be able to sell the car for as much as if the vehicle hadn’t been wrecked.

However, if the vehicle is older and only has cosmetic damage, you may choose to keep it.

If a car has frame damage, is it totaled?

An insurance company will typically total a vehicle if it has frame damage due to the significant repair costs. However, your insurer will determine if your car is totaled on a case-by-case basis.

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