Do I have to pay insurance for a totaled car?

If someone totals your car in an accident, you’re likely wondering what your options are and if your insurance will cover the cost of a new car.

You have many options available to you if someone totals your car besides accepting your insurance company’s offer. You also have choices when insuring a totaled car.

Understanding your insurance policy is the best way to determine what you should do with a totaled car.

Do I have to pay insurance for a totaled car?

Generally, no — if your insurance company decides your car is totaled, you are no longer required to pay insurance on it. Insuring a totaled car is often not necessary.

When someone damages your car to the point that your insurance company decides it’s not worth the costs of repairing it, they will consider it totaled. Your insurance company refers to this as total loss.

The definition of total loss is if a car’s repairs, including insurance, would cost more than an average of 80% of the vehicle’s current price. This percentage can vary between insurance companies and states.

Read more: Can you ask your insurance company to total your car? (Negotiate a Write-Off)

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How does my insurance company decide if my car is a total loss?

Your insurance adjuster will decide if your car is a total loss. They will look at the condition of the body, the interior, the tires, the mileage, and the costs of any additional parts. They will try to find the price for your vehicle as it was before it was totaled by looking at similar models in your area. Calculating the total loss estimate of a similar vehicle, they will finally decide the actual cash value (ACV) of your vehicle.

The ACV is the reference point that decides if your car is a total loss. If repair costs exceed a percentage of that number as determined by your insurance company, they may consider your car a total loss. You can dispute the claim if you wish.

For your car to be a total loss, one of a few things must be the case:

• The cost of repairs exceeds the cost of the vehicle.
• A mechanic cannot safely repair the vehicle.
• Your state decides the car is a total loss.

For your state to determine if a car meets the threshold of a total loss, they will, like your insurance company, assign a percentage describing what the cost of repairs will be compared to the cost of a similar vehicle. The percentage of repair costs can be between 50%-100% of the vehicle’s value before the accident, depending on your state’s policy. Not all states have a legal threshold, instead leaving the decision to the insurance company.

Read More: Do I have to repair my car with the insurance money?

What are my options if someone totals my car?

You don’t necessarily have to accept your insurance company’s payout if someone totals your car.

One thing you can do is trade in the vehicle at a dealership. You could also sell it to a junkyard as scrap metal. You can donate it to charity for the tax credit or salvage the car.

Another option is to repair it yourself. However, because the state considers your car totaled, it will have what they call a salvage title. While you can obtain car insurance for a salvage car title, you need to know the risks and understand who is willing to cover them. This means that even if you repair the vehicle and can drive it again, your insurance rates will be especially high. You can apply for a new title if you or someone else repairs your vehicle.

How much can I get for a totaled car?

If you sell your car to a junkyard, most of the time, weight determines its value. This is because a totaled car is little more than scrap metal to most buyers. However, how much your car is worth depends on how much scrap metal is worth on any given day, and the price can fluctuate wildly. In any event, you shouldn’t expect to get much more than a few hundred dollars using this method.

An alternative is selling it to a company that specializes in buying totaled cars. These companies often take into account other factors besides weight, including the quality of the interior, its body, and its title. If you go this route, you can expect to get slightly more.

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Will my insurance rates go up?

Your insurance rates will go up if the accident was your fault. How much your rates increase also depends on the nature of the accident. If you injured someone and the accident was your fault, your rates will go up more than if there were no injuries. If this wasn’t the first time you’ve been at fault for an accident and caused significant property damage, your insurance company will increase your rates far more than if it was the first time.

Car insurance claims will typically stay on your record for between three and five years. That’s how long it will take before your rates go back down.

Will my insurance company replace my car?

Virtually all insurance companies will cover the cost of a new car if it is totaled immediately after you get it and have full coverage. At worst, they’ll subtract the deductible on your policy from the price.

Most insurance companies will replace your car as long as it’s very new. This often means you’ve owned the vehicle for less than three months.

However, your insurance company will not pay off any loans you may have taken out to buy the car if you don’t have GAP insurance.

Can I still get insurance on a totaled car I’ve repaired?

Yes, but because the state assigns a rebuilt salvage title to a totaled but repaired vehicle, your options will be more limited. Many insurance companies don’t provide insurance to a car with a rebuilt salvage title because they can’t determine the quality of the workmanship on the repaired vehicle. When trying to insure a totaled car, make sure you’re comparing companies that cover cars with salvage titles.

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Case Studies: Insurance Scenarios for Totaled Cars

Case Study 1: John’s Total Loss Coverage

John owns a brand-new car and has comprehensive insurance coverage, including total loss coverage. Unfortunately, he gets into a severe accident that renders his car a total loss. Since he opted for total loss coverage, his insurance company determines the actual cash value (ACV) of his car and offers him a payout equal to that amount.

As a result, John receives a fair settlement for his totaled car, and he does not have to pay insurance on it anymore.

Case Study 2: Sarah’s Salvage Title and Repair

Sarah’s car is deemed a total loss after a collision, and she decides to salvage it by repairing it herself. She finds an insurance company that offers coverage for cars with salvage titles. Although her insurance rates are higher due to the salvage title, Sarah is able to obtain the necessary insurance to legally drive her repaired car.

Despite the increased rates, she chooses this option because repairing the car is more cost-effective for her than purchasing a new one.

Case Study 3: Michael’s Gap Insurance

Michael recently purchased a new car and financed it with a loan. He also added gap insurance to his policy. Unfortunately, his car is involved in a severe accident, resulting in a total loss. While his insurance company determines the ACV of his car and offers him a payout, the amount falls short of the remaining balance on his loan.

However, thanks to his gap insurance, Michael’s insurance company covers the gap between the ACV payout and the outstanding loan balance, ensuring he is not left with any financial burden.

Case Study 4: Emily’s Limited Insurance Options

Emily owns an older car that has been in her family for years. After it is totaled in an accident, she attempts to find insurance coverage for her repaired car with a salvage title. However, she discovers that many insurance companies are unwilling to provide coverage for vehicles with salvage titles due to the uncertainty surrounding the quality of repairs.

Emily’s options for insurance are limited, and she may have to explore alternative solutions, such as seeking coverage from specialized insurers or accepting higher insurance rates from companies that do cover salvage titles.

When Your Car is Totaled: Additional Considerations

When dealing with a totaled car, there are several additional factors and scenarios to consider beyond just accepting an insurance payout. Here’s a guide on various aspects to keep in mind, including state-specific total loss thresholds and options if you wish to keep your totaled car.

Understanding State-Specific Total Loss Thresholds

Different states have specific thresholds for determining whether a car is a total loss. These thresholds affect how insurance companies classify a vehicle as totaled and can influence your insurance payout and other options. Here’s a look at some state-specific thresholds:

• Arkansas Total Loss Threshold: In Arkansas, a car is typically considered a total loss if repair costs exceed 70% of the car’s ACV.
• New Jersey Total Loss Threshold: New Jersey has a 75% threshold for determining total loss.
• Utah Total Loss Threshold: Utah generally uses a threshold of 80% for total loss decisions.
• Missouri Total Loss Threshold: Missouri has a threshold of 80% for declaring a car a total loss.

If Your Insurance Totals Your Car

When your insurance company determines that your car is a total loss, there are several steps and considerations:

1. Insurance Payment for a Totaled Car

• Insurance Payout for a Totaled Car: Your insurance company will offer an amount based on the actual cash value (ACV) of your vehicle before the accident. This payout might not cover the full amount owed if you have a loan.

2. Totaled and financed car with no insurance

• No Gap Insurance for a Totaled Car: If you have a loan on your car and no gap insurance, you might owe more than the insurance payout. This can be a significant financial burden.

3. Keeping a Totaled Car

If you wish to keep a totaled car, here’s what you need to know:

• If you feel that insurance totaled your car, But you Want to Keep It: In some cases, you may opt to keep the car, but you will need to negotiate with your insurer. The insurance payout will typically be reduced if you decide to retain the vehicle.
• Insurance for a Totaled Car: Insuring a car with a salvage title can be challenging. You’ll need to find insurers that offer coverage for cars with rebuilt titles.

Insurance Company Policies

Different insurance companies have varied policies regarding totaled cars:

• State Farm coverage for a totaled car: State Farm will typically cover the cost of a new car if it’s totaled, minus the deductible. If you wish to keep a totaled car, you’ll need to handle the salvage title and insurance separately.
• USAA Total Loss Threshold: USAA, like other insurers, follows the state-specific total loss thresholds and will adjust payouts based on the vehicle’s ACV and repair costs.

Additional Tips for Handling a Totaled Car

• Explore Alternatives: Consider selling the car to a junkyard or a specialized company that buys totaled cars if you decide not to keep it.
• Check Insurance Options: Research insurance companies that offer coverage for vehicles with salvage titles to ensure you can drive legally and affordably if you decide to repair and keep the car.
• Understand Your Rights: Review your insurance policy to understand your options and rights when your car is deemed a total loss. This includes how your payout is calculated and what options you have if you want to keep your car.

By understanding these factors and state-specific thresholds, you can make more informed decisions regarding your totaled vehicle and navigate the insurance process effectively.

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To Do After Insurance Totals Your Car

If your insurance company has determined that your vehicle is a total loss, it’s important to understand how to handle the situation to ensure you receive the best outcome. Here’s a brief guide:

• Review Your Totaled Car Insurance Policy: Check the details of your totaled car insurance policy to understand what is covered and how the payout is calculated.
• Evaluate the Totaled Car Insurance Payout: The payout should reflect the actual cash value (ACV) of your vehicle before the accident. Ensure that the amount is fair based on your car’s condition and any documentation you provided.
• Address the Situation: If you feel that insurance totaled your car and the payout is lower than expected, contact your insurer to discuss the valuation. Provide additional evidence or seek an independent appraisal if necessary.

By following these steps, you can better navigate the process and potentially secure a more favorable outcome.

Final Thoughts on Insuring a Totaled Car

When insuring a totaled car, you don’t necessarily need insurance if your car has been totaled and is undrivable. You have options for what you want to do with the car after someone’s totaled it. If you’re properly insured, your insurance company will compensate you for the value of the vehicle minus the deductible. If for whatever reason you don’t want to accept the insurance company’s offer, you have alternatives that you can pursue as well.

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