What happens when a car is totaled?
When a car is totaled, the insurance company may pay the owner for the damaged car instead of helping pay for repairs, depending on the car insurance coverage that applies. This may happen when the estimated repair costs are more than the car was worth right before the damage, it cannot be safely repaired or state rules consider it a total loss.
What does it mean when an insurance carrier declares a vehicle “totaled” or a “total loss”?
It means the estimated repair cost exceeds the car’s value prior to the damage or it may be required by the state if the estimated repair cost reaches a set percentage of the car’s value prior to the damage. The percentage varies by state.
How does an insurance company determine the value of a totaled car?
To determine value of a totaled car, the insurance company calculates the car's actual cash value (ACV), or what it was worth right before the damage. This considers factors like the car's age, mileage, features and condition, as well as what similar vehicles are selling for in the area. The insurer can explain what valuation method and factors were relied upon to determine ACV.
What happens to the totaled car?
Once the insurance company determines the car’s value, it usually makes an offer to pay the owner for their totaled car, minus their insurance deductible. If the owner accepts the offer, the owner is paid and ownership of the damaged car usually transfers to the insurance company, which then handles the vehicle according to state rules.
Before the transfer, if the vehicle is accessible and safe to enter, the owner may want to remove personal items and paperwork, clear any personal data from the navigation system and other digital systems in the car and remove the license plates.
Can the owner keep a totaled car?
Keeping a totaled car may be possible, but it depends on state regulations. If the owner decides to keep the car, they’ll receive a reduced payout from the insurance company. The car may also receive a salvage title, which is a permanent mark on the vehicle's history showing it was damaged and deemed uneconomical to repair. A salvage title follows the car no matter who owns it and can make it significantly harder to insure or resell.
What if the owner still owes money on a loan for a car that’s been totaled?
If there’s a loan or lease on the car, the insurance payout will typically go to the lender first to help pay the remaining loan balance. If the actual cash value amount is greater than the remaining loan amount, the owner will receive the balance of the payout. If the payout is less than what’s still owed on the loan, the owner will be responsible for paying the lender the remaining balance.
Some insurance companies offer guaranteed asset protection insurance, or “GAP” insurance, to cover the remaining balance on a loan if the insurance payout on a totaled car is less than the amount still owed.
If you have additional questions, consider talking with an insurance agent from State Farm.
This content was developed with the help of AI and reviewed by State Farm editors.
The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third-party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.
State Farm Mutual Automobile Insurance Company
State Farm Indemnity Company
Bloomington, IL
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Richardson, TX
