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If my car is totaled, what does my insurance pay?

Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted...

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella...

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Reviewed byDaniel Walker
Licensed Auto Insurance Agenthttps://res.cloudinary.com/quotellc/image/upload/insurance-site-images/insproviders-live/ca745a12-daniel-walker.png

UPDATED: Mar 19, 2020

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Here's what you need to know...
  • A total loss is another word for an insurance write-off
  • Technically, cars are totaled when the damages are estimated to cost more to repair than the vehicle is worth on the market
  • In some states, insurance companies can declare a car a total loss when the damages exceed a percentage of the car’s value
  • The company is still required to pay the full Actual Cash Value even when the declaration is made after the threshold is exceeded
  • Companies have to pay for the vehicle’s fair market value, the cost to tow the vehicle to a shop, the cost of repair estimates, inspections, taxes, title fees, and registration fees for a new car when settling a total loss

You don’t have to be in a multi-vehicle accident just to total your car. In fact, some vehicles can be totaled after something as minor as a run-in with a shopping cart.

Whether or not you’re going to be left shopping for a new car depends entirely on how much the car costs to repair, how old the vehicle is, how quickly it’s depreciated, and what it’s currently worth.

If you own a car that’s worth carrying full coverage on, you should familiarize with your insurance companies policies and when a vehicle is considered totaled.

There are certain expenses that your insurer will pay for and other expenses that aren’t directly covered under the terms of your policy. Here’s what consumers need to know about total loss claims:

What is a total loss?

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If you aren’t familiar with industry lingo, it’s important to learn what exactly a total loss is.

In the personal car insurance industry, a total loss is defined as a write-off after the insured property is damaged beyond repair or after the repair cost of the car exceeds the value of the car’s insurance policy.

You can be forced to deal with a total loss claim after you get in a head-on collision, after a tree branch falls on your car, or even after your car is keyed. It doesn’t matter how the loss occurred but instead how much damage was done.

Since cars are totaled only after vehicle repair costs exceed the value of the car, the car’s value dictates how serious the damage has to be for the car to be written off.

The insurance company will pay to have the vehicle inspected and the damage estimated before they make a decision. After doing this, the company will research how much the car is worth and then they will extend a settlement offer.

Does the repair cost have to exceed the vehicle’s Actual Cash Value?

Actual Cash Value is a term that you’re going to hear a lot when you’re filing a total loss physical damage claim. In the insurance world, ACV is the fair market value of the car where depreciation is factored in.

While it’s common for carriers to total cars only after the damage exceeds the pre-determined ACV, it’s not always a requirement.

Some states have Total Loss Thresholds (TLT). A Total Loss Threshold is a damage ratio that says that cars can be totaled if the damage and salvage value of the car exceeds a stated percentage of the car’s value.

Some states like Alabama and Nebraska have a TLT of 75% and other states like Colorado and Texas have a 100% TLT.

Does the insurer pay less when there is a Total Loss Threshold?

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If you live in a state where cars are totaled when a damage ratio is exceeded, it’s reasonable that you might worry about receiving less money for your car.

Not to worry. The formula only affects whether or not the car can be declared totaled but it doesn’t affect your payout. You will still receive your full total loss payment.

It takes some time for your claims adjuster to calculate how much they are going to offer you when settling an auto insurance claim on totaled cars. You don’t just get a check for one thing. Here are some of the items that are included in your total loss check:

  • The vehicle’s Actual Cash Value
  • Estimated cost of sales taxes for replacement vehicle
  • Estimated cost of titling fees for replacement vehicle
  • Estimated cost of registration fees for replacement vehicle
  • Towing fees and storage fees for totaled car
  • Expenses for estimates and inspections

How is Actual Cash Value calculated?

Claims adjusters use a bunch of different tools and guides to come up with an Actual Cash Value. Unfortunately, there’s not just one guide that companies use that you can access to calculate values on your own. They will use a combination of:

  • NADA guidebooks
  • Kelley Blue Book valuation guides
  • Listings for sale by owner
  • Dealership sales prices
  • Appraisals that have been drafted by professionals

Will the insurance company pay to rent a car?

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The cost to rent a car while you’re looking for a replacement isn’t always covered under your policy. It depends entirely on your coverage options, how the damage occurred, and who was liable for the damage.

If you’re at fault for a collision or you’re filing a comprehensive claim, you need to have rental reimbursement for a daily benefit.

If you’re not at fault for the loss, the other party’s insurance company will pay for your rental for a reasonable amount of time. Unfortunately, if the other party was uninsured or their company isn’t accepting fault, it can put you in a bind.

This is why you need rental reimbursement coverage.

If you get into an accident, you want to feel secure in knowing that your policy will pay for your loss. If you don’t have enough coverage, you could be in for trouble when you go to file a physical damage claim.

The first step is pricing how much full coverage will cost. Use an online quoting tool, compare rates through different leading insurers, and then you can determine if full coverage is worth it.

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