What Happens If Your Vehicle is Totaled?

A blue car on the side of the road that was rear-ended by a white car.When you take your insurance’s definition of a total loss into consideration, it’s easy to see why a seemingly minor dent totaled your 2007 Saturn Aura. By most definitions, a vehicle is considered totaled when the cost of repair exceeds the actual value of the car. If your car’s value is low enough, even a slight fender bender can result in a total loss declaration. However, though it’s easy to understand how a car can be considered totaled, it’s less obvious what happens after your vehicle is totaled. Let’s review the insurance process and what this designation means for you.

What Happens if Your Vehicle is Totaled in an Accident?

If you’re involved in an accident, there are some preliminary steps you should take to ensure the safety of those involved. It’s important to make sure you also have all the information necessary for your insurance provider. Subsequently, the following process will occur:

  • Contact Your Agent: You should inform your insurance agent of the accident so they can initiate the insurance claim.
  • Insurance Designation: Your insurance provider will determine if your car is a total loss based on the repair costs.
  • Payment Issuance: Your insurance provider will offer payment for the actual cash value of the vehicle, minus your deductible.

Comprehensive and collision coverage will help pay for the value of your totaled car. However, if you paid off your car and opted out of these policies, you will have to pay for a replacement car out-of-pocket.

How Does Insurance Determine the Value of Your Car?

Your vehicle’s worth – known by insurance as the “actual cash value” – is determined by a few factors. Your insurer will review the car’s condition, age, mileage, and resale value and compare it to the price of similar vehicles in the area. The insurance will then forward you the amount your car was valued at during the time of the accident.

Do You Have to Pay the Outstanding Loan of a Totaled Car?

If you were financing your totaled car, insurers often make the claim check out to both you and the lender. This is so you can come to an agreement with the lender about how to release the funds. In this case, the lender will be fully reimbursed, and any remaining funds will be paid to you. However, there may be an outstanding balance even after the check clears, meaning you are responsible for covering the remaining amount of the car loan. If you invested in loan or lease gap coverage, though, it would help cover the out-of-pocket expenses on the totaled vehicle.

What if the Total Loss Wasn’t Your Fault?

Sometimes a totaled vehicle may not be anyone’s fault, such as a tree falling on top of your parked car. If you have comprehensive coverage, you will still be reimbursed the actual cash value minus the deductible. However, if the accident was the fault of another driver, your collision coverage will reimburse you, but your insurer may still seek repayment from the other driver’s insurance carrier. In many cases, this also means you may have your deductible reimbursed.

Knowing what occurs after your vehicle is totaled will help you make the best insurance investment decisions. When your car is paid off, you may not require comprehensive or collision insurance, but understanding that you will still be on the hook for out-of-pocket expenses should convince you these additional policies are still necessary. At TJ Wood Insurance, our agents can ensure your auto insurance is outfitted with the appropriate additions for your needs. Contact us today to get auto coverage that meets your specific needs and situation.