Here’s What Happens to Your Car When Insurance Totals It
When a car is totaled – in a car accident or otherwise – it means the cost to repair it is more than what the vehicle is worth. In these cases, insurance companies usually declare the car a total loss and follow specific steps to settle the claim. But that doesn’t mean you’re stuck without options. Whether you want to keep the car, sell it or understand how payouts work, knowing your choices can help you make the best decision. Keep reading to learn what happens next and what you can do after your car is declared totaled.
What Does It Mean When a Car Is "Totaled"?
A car is considered totaled when the cost to repair it exceeds its actual cash value or, in some states, a certain percentage of that value. This threshold varies but is often around 70% to 80% of the car’s market value. For example, if your vehicle is worth $5,000 and the necessary repairs would cost $4,000, your insurance company may decide it’s not worth fixing and declare it a total loss. Even if the car is technically repairable, it may be totaled if it doesn’t make financial sense to restore.
How Does the Insurance Company Decide if My Car Is Totaled?
Insurance companies assess the damage and compare the estimated repair cost to the car’s actual cash value (ACV) right before the accident. If the repair cost exceeds the ACV or exceeds your state’s legal threshold, they’ll declare it a total loss. Some states use a Total Loss Formula (TLF), which adds the repair cost to the salvage value and compares it to the ACV. If the sum is greater than the ACV, the car is totaled.
What Happens After My Car Is Declared Totaled?
Once your car is declared totaled, your insurance company will make a settlement offer based on the ACV of your car, minus your deductible. That means, if your motor vehicle’s ACV is $6,000 and you have a $500 deductible, you’ll receive $5,500. In most cases, the insurer will then take ownership of the car and sell it at a salvage auction. You’ll typically need to sign over the title and remove your personal belongings before the vehicle is towed away.
Can I Keep My Totaled Car?
Yes, you can choose to retain your totaled vehicle, but your insurance payout will be reduced by the estimated salvage value of the car. If the car’s ACV is $5,000 and the salvage value is $1,000, you’ll get $4,000 instead. If you keep the car, it will receive a salvage title, but that means it can’t be legally driven until it’s repaired and passes a state inspection to receive a rebuilt title. This process varies by state but is crucial if you want to make the car roadworthy again.
What Do Insurance Companies Do With Totaled Cars?
Most insurance companies sell totaled vehicles at salvage auctions to the highest bidder. These buyers are typically junkyards, auto parts dealers, rebuilders or hobbyists. Some vehicles are stripped for usable parts, while others are recycled for scrap metal. If the damage is relatively minor, the car may be repaired and resold as a rebuilt vehicle, often at a significant discount compared to its original market value.
Can I Buy a Totaled Car From an Insurance Company?
While insurance companies usually don’t sell totaled cars directly to individuals, you can purchase them through salvage auctions. These auctions often require registration, and in some cases, a dealer or dismantler’s license. Some people buy totaled vehicles to rebuild and resell, while others use them as parts donors for similar vehicles. It’s a cost-effective way to source hard-to-find components or get a car at a steep discount if you’re prepared to handle the repairs and title process.
What If I Disagree With the Insurance Company’s Offer?
If you feel the insurer’s offer doesn’t reflect your car’s true value, you have the right to negotiate. Start by gathering evidence, such as:
- Listings of similar vehicles in your area (mileage, condition, year, etc.)
- Maintenance records and upgrades (new tires, custom features)
- Professional appraisals or second repair estimates
Request a re-evaluation of your vehicle’s value, and be prepared to back up your case with solid documentation. Most insurers are willing to review your concerns if you present compelling data.
Can I Still Insure a Totaled Car?
You can insure a previously totaled car, but only after it’s repaired and receives a rebuilt title. Once the car passes inspection and is deemed roadworthy, you can apply for insurance. However, keep in mind that some insurers won’t offer full coverage on rebuilt vehicles. Premiums also may be higher, and resale value is typically lower. Additionally, you may only be eligible for liability coverage, depending on the insurer. Always compare quotes and make sure you fully understand the limitations before insuring a rebuilt car.
Should I Keep or Surrender My Totaled Car?
Deciding whether to keep your totaled car depends on your situation. Keep it if you believe the vehicle can be repaired affordably, or if it has sentimental value or rare parts you can sell separately. You can also surrender it if you want to avoid the hassle of repairs, inspections and re-titling. Letting the insurance company take the car is typically faster and easier.
At the end of the day, you should be weighing the financial and practical factors carefully, since sometimes the cost of rebuilding a totaled vehicle can outweigh the value it provides.
Where Do Totaled Cars End Up?
Most totaled cars are sold at salvage auctions, where a variety of buyers bid on them. Depending on the damage, the car may:
- Be repaired and resold as a rebuilt title vehicle
- Be stripped for parts, especially if valuable components like the engine or transmission are intact
- Be recycled for scrap, especially if the car is beyond repair
Some vehicles even find new life in motorsports or DIY rebuild projects. While the path of each totaled car varies, they rarely go to waste.
Have More Questions?
Understanding what happens when your car is totaled can help you make smart decisions during a difficult time. Knowing your rights and options can make the process smoother and less stressful. If you have questions, don’t hesitate to contact your insurance provider, or consult a local expert at Capital Auto Auction for guidance. Contact us today!