Can Your Insurance Company Force You to Total Your Car?
Insurance companies can declare a car totaled and keep your vehicle in certain circumstances. But you have the option to dispute it, and you may even be able to keep your vehicle.
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Bylines include Forbes, Bankrate, and CBS News
Aly is a reporter specializing in real estate, mortgages, and personal finance. You can find her work in Hearst newspapers and numerous financial publications.
Background working with banks and insurance companies
Sarah enjoys helping people find smarter ways to spend their money. She covers auto financing, banking, credit cards, credit health, insurance, and personal loans.
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When you file an insurance claim on your vehicle, your car insurance company considers the costs of the repair in relation to the car’s value. If the cost to repair outweighs the actual cash value (ACV), the insurer typically declares the car “totaled” and pays you its ACV, which you can use to get a new vehicle.[1]
Here’s what to know about totaled vehicles and how it could affect you if your insurance company totals your car.
When insurance companies can total your vehicle
Car insurance companies use data and computer programs to estimate the cost of repairs, as well as the market value of those cars, when assessing claims. They then decide to either repair the vehicle or total it and declare the vehicle a total loss.
Generally speaking, an insurance company will decide if your car is totaled if the costs to repair it are more than the car is worth. So if repairs on a vehicle are estimated at $6,500, and the car’s cash value is only $5,000, the insurer will opt to total the car instead of paying for repairs.[2]
In some states, an auto insurer can declare a car totaled even when repair costs don’t outweigh the vehicle’s current value. In Alabama, for example, state laws say if the repairs are 75% or more of the car’s value, an insurer can consider it totaled.[3]
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Can you dispute your insurance company’s decision?
You can dispute your insurance company’s decision to total your car if you think the valuation is incorrect. You might do this if you have certain upgrades or repairs to the car that add to its value or if you see your same model for sale at a higher price from local used car dealers.[4]
If you plan to dispute your car’s totaled status, you’ll need to do so quickly.
Ways to dispute the decision
To dispute a car being totaled, start by negotiating with your insurer. You’ll need evidence to do this — something that shows your car is worth more than the valuation or that repairs are going to cost less than current estimations.
Evidence to dispute your insurer’s decision can include things like:
Quotes from car dealerships
Affidavits from mechanics attesting to your car’s value being more than the typical make/model
Estimates from mechanics showing repair costs will be less than your insurer has quoted for the car
Mileage records showing you haven’t used the car as much as a typical car of its age
Service receipts detailing upgrades or custom parts that add value to the vehicle
Photos of the vehicle showing it in excellent condition
You can also ask your insurer for an independent appraisal. Then, both you and your insurer hire a professional appraiser to assess the vehicle and compare valuations.
Bringing in a mediator or lawyer to negotiate on your behalf is another strategy. Or you can file a lawsuit against the insurer if your attorney thinks you have a case. You can also file a complaint with your state insurance department.
What to do if you total your car
If you agree with your insurer’s determination that your vehicle is a total loss, the insurer will take possession of your vehicle. The insurer will also send you a payment for the value of the car, minus your deductible.
Before your insurer takes possession of the vehicle, be sure to remove license plates, clear out any personal items, and give the keys and title to your insurer.
Can you keep your totaled vehicle?
Sometimes, you can keep your vehicle when your auto insurance company determines it’s a total loss. But it depends on your state and policy conditions. You may want to do this if the car holds sentimental value or if you’re able to make the repairs yourself.
Let your insurer know right away that you plan to keep the car. Your insurer will deduct the car’s salvage value, or how much it would sell for parts, to determine your new settlement amount.
Once you repair the car, you need to get a new title from your state’s insurance department — called a rebuilt title — to drive it again. This indicates your car has been in a major incident, and having one can make it hard to insure and sell the car down the line.
Insurance coverage for a totaled car
Having certain types of insurance coverage can help offset the costs associated with a totaled vehicle. Talk to your insurance agent if you need help choosing the right coverages for your vehicle and needs.
Here are some common types of insurance coverage for a totaled car:
Full coverage
Full-coverage insurance — including comprehensive and collision coverage — covers property damage to your vehicle when you’re at fault in a car accident and when something other than a collision damages your car.
Gap coverage
In the case of a total loss, gap insurance pays the difference between the car’s worth and your remaining auto loan balance. If you lease or finance your vehicle, the lender will typically require you to have gap coverage for at least the first few years.
New car replacement coverage
With new car replacementcoverage, your insurance company replaces your totaled car with a new one of the same make and model.
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How much will insurance pay you for your totaled vehicle?
The exact amount you’ll get for your totaled vehicle depends on several factors, including your coverage and the type of policy you have. Typically, both collision and comprehensive coverage pay out the actual cash value based on your car’s age and condition (prior to the damage). Remember that you may also owe a deductible on your insurance claim, which your insurer will deduct from your payout amount.
If you weren’t at fault in the accident that totaled your car, the at-fault driver’s insurance will likely cover it. In this case, no deductible would apply.
Totaled vehicle FAQs
Having a vehicle totaled is a big deal, but you do have options. Check out the additional information below to learn more about what it means and how to proceed.
Why are insurance companies so quick to total a car?
Car insurance companies total vehicles if the costs to repair them are more than (or close to more than) what the car is worth, as it saves the company money.
Should you cancel car insurance after a total loss?
You can cancel car insurance coverage on a totaled car after you’ve officially turned over your license plate to your state’s motor vehicle department. Keep in mind that once you replace the car, you’ll need to obtain new insurance coverage before you can get behind the wheel.
It may be better to keep your coverage while you look for a new car, as gaps in your insurance history can sometimes lead to higher rates. You can reduce your coverage during this time to potentially save a little money.
What does Texas consider a total loss?
In Texas, insurers consider a car totaled if its repairs cost more than the car’s worth. Some states have lower thresholds (in Alabama, it’s just 75% of the car’s worth).
Can you keep your totaled car in Georgia?
Yes, you can keep a totaled vehicle in Georgia. You’ll need to get an official salvage title for the vehicle, fill out several forms, and pay a fee to Georgia’s motor vehicle department.
Nolo. "The Insurance Company Says My Car Is a Total Loss. What Now?."
Aly J. Yale
Aly J. Yale is a freelance writer and reporter covering real estate, mortgages, and personal finance. Her work has been published in Forbes, Business Insider, Money, CBS News, US News & World Report, and The Miami Herald. She has a bachelor’s degree in radio-TV-film and news-editorial journalism from the Bob Schieffer College of Communication at TCU and is a member of the National Association of Real Estate Editors.
Background working with banks and insurance companies
Sarah enjoys helping people find smarter ways to spend their money. She covers auto financing, banking, credit cards, credit health, insurance, and personal loans.
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