What does “totaling” a car mean?  A car is generally considered a total loss when the cost to repair the damage on the car exceeds the value of the car.  In some states laws define a totaled vehicle by specific thresholds, otherwise in most cases the insurer determines whether a vehicle is considered a total loss.

Comprehensive and collision coverage on your auto policy help pay to replace a totaled vehicle.  These separate coverages are typically required on your auto insurance policy if you are leasing or financing your vehicle.  If your vehicle is paid off these coverages are optional – but important to consider.  If your car is totaled and you don’t have comprehensive or collision coverage, you may have to pay out of pocket to buy a replacement vehicle. 

WHAT HAPPENS IF MY CAR IS TOTALED IN AN ACCIDENT?

Here are some basic steps to follow before or after your vehicle is considered totaled:

  • Contact your agent and initiate an insurance claim. 
  • Your insurer will determine whether the vehicle is a total lost, based on the estimated repair costs.
  • Your insurer will issue payment for the actual cash value of the totaled vehicle, minus your deductible on your comprehensive or collision coverage. 
HOW IS THE VALUE OF MY CAR DECIDED?

To determine your car’s worth (in insurance terms, this is called the “actual cash value”) at the time of the accident, insurers typically use a number of factors to figure your vehicle’s actual cash value.  These include its age, condition, mileage, and resale value – in addition to the selling price of similar vehicles in your area.

DO I STILL HAVE TO PAY A LOAN ON A TOTALED CAR?

If you are financing a vehicle that’s been declared a total loss, your insurance company will likely make the claim check payable to both you and your lender, which means you’ll have to come to an agreement with your lender on how to release that money, according to the Insurance Information Institute (III).  Generally, the lender will be reimbursed first, with any remaining money then being paid to you.

It is possible that you may still owe your lender more for the car than the insurance payment you receive.  If that is the case, you are responsible for paying the remining balance on the car lease or loan.  Here’s an example: let’s say you owe $15,000 on your car loan, but your vehicle’s value has depreciated to $13,000 when it’s totaled.  If you have collision coverage on the vehicle, your insurer would reimburse you for the actual cash value of your car – in this case, $13,000.  You would have to pay your lender that amount, plus the $2,000 out of your own pocket. 

This is why in the past I have stressed the importance of considering loan or lease gap coverage.  Gap coverage is one way to protect against paying a lender out of pocket for a totaled vehicle.  Depending on your insurer, this coverage may be available.  In general, it is very inexpensive to add to your auto policy. 

WHAT IF THE TOTAL LOSS WASN’T MY FAULT?

Sometimes a totaled car may not be anyone’s fault.  For example, if a tree falls on your parked car and your insurer deems it a total loss, you will likely be reimbursed for the total actual cash value of the vehicle using your comprehensive coverage on the policy, minus your deductible. 

If your vehicle is totaled in an accident that is caused by another driver, your collision coverage may first come into play.  However, your insurer may then seek payment from the other driver’s insurer to cover the loss.  This may mean you will be reimbursed for the deductible that was subtracted from your insurance payout. 

IF MY CAR’S AIRBAGS DEPLOYED DOES THAT MEAN IT IS A TOTAL LOSS?

While it does not necessarily mean your car will be a total loss, if your vehicle’s airbags deploy in a car accident it is very likely.  Your insurance adjuster will assess the situation and determine if the cost of repairing the airbags and repairing your vehicle would exceed its actual cash value.  If the cost of repairs is less than the value of your vehicle, your car will likely not be declared a total loss. 

Have more questions about car insurance coverages or options?  Give me a call at 724-575-7237.  As an agent, I’m here to explain the options and guide you to coverage you are comfortable with when you get behind the wheel.

Sources: Insurance Information Institute (III). 

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