What Happens if Your Car Is Totaled in an Accident?

A car “totaled” in an accident refers to a situation where the repair costs exceed the car's value. When that happens, the insurance carrier will likely declare your car a total loss and offer you a settlement amount based on the car's market value minus any deductible or salvage value.

You can either accept the settlement amount, which is usually enough to purchase a similar car in the same condition or negotiate with the insurance carrier for a higher settlement amount. However, it is not unusual for the insurance company's initial offer to be lower than expected. For this reason, it is important to understand your car's value and condition before negotiating.

Here is what you should know about a totaled car after an accident.

What Happens if You and the Insurer Disagree on Your Car's Value if It's Totaled?

It is not uncommon for policyholders and insurance companies to differ on a totaled car's value. Below, we've highlighted a few things you can do to try to resolve such an issue:

The first option is to get an independent assessment. While at it, ensure the appraiser is qualified and reputable. Also, ensure their appraisal considers the car's condition, mileage, and any upgrades or modifications.

If possible, provide evidence to prove the actual value of your car as opposed to what the insurance company is offering. For example, you may use evidence of recent maintenance records, receipts for upgrades or modifications, or sales listings for similar cars in your area that support your valuation.

The other option is to try to negotiate with the insurance company. But before that, be prepared to explain why you think their offer is too low and provide evidence to support your case.

You may file a complaint with your state's insurance department if negotiations fail. They will investigate your case and work with the insurance company to resolve the issue.

Resolving a disagreement over the value of your totaled car can take time and effort. This process could also drain you mentally, physically, emotionally, and financially, making it difficult to focus on your daily life. For this reason, you should consider consulting an experienced attorney if your car was totaled and the accident was not your fault.

An experienced insurance claim dispute attorney will review your case and determine whether the insurance company is acting out of good faith. Or if they denied your claim for valid reasons, such as a lack of evidence, the attorney can help gather everything you need to support your case.

What Happens if You Keep Your Totaled Car?

If you keep your totaled car, you will likely receive a lower settlement amount from the insurance company. This is because the insurance company will deduct the salvage value of the car (the amount they could sell it for in its current condition) from the settlement offer.

Once you've accepted the settlement offer from the insurance carrier, you will need to transfer the car's original title to the insurance company. Then, the insurance provider will provide you with a salvage title when the transfer is complete.

What Is a Salvage Title? 

A salvage title is a document that shows that the car has been totaled and cannot be driven on public roads unless it has been repaired and passed an inspection.

So, if you keep your totaled car, you can use the settlement money to repair and return it to a roadworthy condition. However, there is a downside you should know before making such a decision; repairing a totaled car can be expensive, and it may not be worth the cost. Of course, this will also depend on the extent of the damage.

In some cases, you can sell the salvage car to a salvage yard or a private buyer. But if you've ever shopped for cars online or at your local dealership, you might have realized that the value of a salvage car is generally much lower than a car in good condition. This explains why it's important to carefully consider whether it makes financial sense to keep the car.

What Determines if a Car Is Totaled?

Here is how an insurance adjuster decides whether a car is "totaled" or not.

After an accident, the insurance company sends an adjuster to assess the damage and determine if repairing the car will cost more than its actual value. It is important to remember that insurance adjusters are typically employed by insurance companies. As a result, they are likely to represent their best interests rather than yours.

This means that the insurance adjuster will try to reduce your car's value as low as possible, preventing the carrier from compensating you fairly.

The insurance company may declare the car a "total loss" or a "write-off" if repairs cost more than the car's value during the assessment process. In other words, instead of paying for the cost of repairs, the insurance company will pay you the actual cash value of your car minus the deductible.

Different insurance companies and states have different procedures for declaring a car totaled. Depending on the percentage of damage to the car's value, it may be necessary to determine if a car is totaled or not by using that percentage as a threshold. Other factors, such as the age and condition of the car, and salvage or resale value, may also be considered.

What Happens if You Still Owe the Bank Money for Your Totaled Car?

The insurance company usually pays the car's actual cash value at the time of the loss if you still owe money, minus any deductible and the amount you still owe on the car loan.

In other words, if you owe more on the car than it is worth, you will still be responsible for paying off the remaining balance of the loan, even if the car is totaled. This is known as being "upside down" or "underwater" on your car loan.

Suppose you have Guaranteed Asset Protection insurance, simply known as GAP insurance; it may cover the difference between the actual cash value of the car and the remaining balance on your car loan.

So let's say your car is worth $10,000, but the car loan is $15,000. The GAP insurance will clear the $5,000 difference ($15,000 – $10,000).

GAP insurance is an optional coverage you can purchase when you buy a car. This type of insurance protects you if you owe more on your car than it is worth.

However, if you don't have GAP insurance, you will need to come up with the remaining balance of the loan out of pocket, which can be a significant financial burden. Sometimes, the lender may be willing to work out a payment plan with you, but this will depend on your circumstances and the lender's policies. For example, the lender will likely agree to negotiate a payment plan with you if you had a good payment history when the car was still in good condition.

What Are the Pros and Cons of Keeping a Totaled Car?

Keeping a totaled car can have pros and cons that depend on your circumstances and the vehicle's condition. Let's take a quick look at some of the potential advantages and disadvantages of keeping a totaled car:

Pros of Keeping a Totaled Car

Depending on the extent of the damage, a totaled car may still have some salvage value. In that case, you can sell the car for parts, scrap metal, or to a salvage yard to recoup some of the vehicle's value.

You may have an emotional attachment to the car and want to keep it for sentimental reasons, even if it is not financially practical. For example, suppose you received the car as a gift from your beloved. In that case, you may want to keep it for its sentimental value.

Lastly, if you keep a totaled car, you can reduce your insurance costs. Insurance companies do not usually provide collision or comprehensive coverage for totaled cars. The logic behind this is that such cars are considered not roadworthy, making them even riskier to insure.

Cons of Keeping a Totaled Car

Such a car may be unsafe to drive. This is because the damage could have affected critical safety features such as the frame, airbags, or braking system.

Even if it is drivable, repairing a totaled car can be expensive and not cost-effective in the long run. Remember that some totaled cars don't usually return to their original condition even after repair.

If you sell the car later, its resale value will likely be significantly lower because it has been declared a total loss.

Lastly, if you still owe money on a car loan for the totaled car, you may have difficulty obtaining financing for a new vehicle.

Generally, the decision to keep a totaled car should only be made after a careful evaluation of the vehicle's condition, salvage value, and your personal circumstances. If the car is unsafe to drive or will require costly repairs, it may be best to let it go and seek a replacement vehicle.

When to Hire a Lawyer If Your Car Is Totaled?

If your car has been totaled in an accident, the process of filing a claim is usually pretty straightforward. However, insurance companies are unpredictable and mostly unfair. There are certain situations where you may want to consider hiring a car accident lawyer to help deal with the insurance company on your behalf.

Let's take a look at examples of such scenarios.

You may need to hire an attorney if you believe that the insurance company undervalued your car. The lawyer can help you negotiate with the insurance company for a more reasonable settlement that reflects your car's true value.

Hiring an attorney may also be necessary if the other driver disputes liability. The attorney will gather evidence to prove the other driver was at fault.

In addition, if the insurance company denies your claim for the totaled car, an experienced lawyer can help you understand your legal rights and options.

Suppose you were injured in the accident; that changes the whole case because you will need medical treatment. The lawyer can help you file a personal injury claim and seek compensation for your medical expenses, lost wages, pain and suffering, among other damages you sustained.

Lastly, you may need to hire an attorney if the insurance company pressures you to accept a settlement quickly. Insurance carriers usually do this hoping to close the case before you realize the importance of involving a lawyer. A seasoned attorney can help you understand the full extent of your losses and negotiate a reasonable settlement.

The bottom line is that you do not always need a lawyer when your car is totaled. This is especially true if you are satisfied with the settlement offer from the insurance company and are not seeking compensation for injuries.

That said, it may be wise to consult with a lawyer if you are unsure about your legal rights or have concerns about the insurance company's offer.

How Morgan & Morgan's Insurance Dispute Lawyers Can Help

For over three decades, Morgan & Morgan has dealt with thousands of insurance companies all over the country, big and small. As a result, we have built a name for ourselves and a reputation to protect. With over $20 billion already recovered and more in the pipeline, our attorneys do not leave any stone unturned when it comes to fighting for the rights of the injured.

So if you or your beloved has been injured in a car accident, contact us for a free case evaluation. We can fight for your right to compensation.