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Totaled car guide

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    Article Highlights

    Getting into a car accident can be a major headache. It’s worse if your car is damaged beyond repair. Totaled cars are typically covered by car insurance, so you should receive a payout to buy a new one. But the amount of money you’ll receive varies based on a few factors.

    If your car leaves the scene of an accident on a tow truck, don’t assume it’s totaled. That determination can be made by contacting your state insurance commissioner.

    “If you get into a serious car accident, check with your state insurance commissioner to understand if it’s considered totaled. When the cost to repair the damage exceeds a certain percentage of your vehicle’s value, it’s deemed totaled…”

    Financial expert, Laura Adams.

    Dealing with the aftermath of a totaled car can be frustrating, but it helps to know what to expect. In this article, we’ll help you understand what happens after your car is totaled, and how much money you’ll get to replace it.

    What does it mean when a car is totaled?

    First, let’s talk about what qualifies as a totaled car. From an insurance perspective, a car is totaled when it will cost more to fix it than its current value. Cars are most commonly totaled after an accident, but your car could also be totaled if a tree fell on it, or if it was overtaken by flood waters during a hurricane.

    Every state has its own regulations about what constitutes a total loss, as Adams indicates:

    “Different states have different laws about when to declare a vehicle a total loss. For instance, it could be when the cost to repair the damage is more than 75% of its actual cash value before the accident. In some cases, your insurer determines whether a vehicle is totaled.”

    How much will you get for your totaled car?

    One of the most common questions drivers have after an accident is “how much money do you get for a totaled car?” The short answer is that it depends on your coverage and policy type. Assuming you have collision and comprehensive coverage, your insurance company will compensate you for the vehicle’s actual cash value (ACV), minus your deductible.

    Your car’s ACV is the monetary value of it’s worth prior to the accident; the value is calculated by your insurance company. ACV also takes into account depreciation, so the payout is almost always less than the original price of the car. For instance, if you bought a car for $40,000 and drove it for 10 years, the ACV could be as low as $8,000.

    How is ACV calculated?

    Your insurance company calculates your car’s actual cash value based on factors like the age of the car, its mileage, the claims history, the make and model, and any upgrades you’ve made over the years. These are all variables that influence depreciation, and effectively impact your payout amount. ACV policies are by far the most common for car insurance policies.

    However, some drivers have an insurance policy that uses replacement cost value (RCV) to reimburse you after a loss. Unlike an ACV policy, an RCV policy reimburses you for the loss without depreciation factored in. So if your car is totaled and you have an RCV policy, you’ll receive payment for the full value of the vehicle, regardless of its age, condition, and so on.

    What is “new car replacement?”

    Having new car replacement coverage can be a lifesaver if you total your car. This type of coverage will pay for the cost of a brand new car, of the same make and model, if your car is declared a total loss. Ultimately, new car replacement coverage gives you the biggest payout after a serious accident.

    New car replacement is an optional coverage, meaning it doesn’t come standard with most car insurance policies. It will raise the price of your premium, but it’s well worth the cost if you want the extra protection and ability to replace a totaled car with a brand new one. Having new car replacement coverage simplifies the value estimation process, as you’ll simply get a check for the sticker price of a new model if your old one is totaled.

    What if you have a lease or loan?

    Many people choose to lease their car or finance a purchase with a loan. Although it can be a more budget-friendly option, financing or leasing your car means you don’t technically own it. If your car is totaled, having a leased car or a car under lien will have an impact on your insurance payment.

    According to Adams:

    “Your auto insurer pays you the actual cash value of a totaled vehicle, less your deductible. If you have an outstanding car loan, you’re still responsible for making payments, even if you owe more than the car is worth.”

    But if your payout from the insurance company isn’t enough to cover the remaining loan payments, and the cost of a new car, gap insurance can come in handy.

    If your car is totaled before you pay off the loan, gap insurance is a great way to compensate for the difference in what you might still owe. With gap insurance, you can use the insurance payout to buy a new car, and you don’t have to pay the remaining loan balance out-of-pocket. Keep in mind that you can’t purchase gap insurance after a loss occurs, so consider purchasing a policy when you first get a car.

    Can You Keep and Repair Your Totaled Car?

    In certain situations, you are allowed to keep your totaled car and pay for the repairs yourself. In that case, your insurance company would deduct the car’s salvage value from your payout. However, keeping a totaled car usually isn’t your best option, and it can cost you a lot of money to fix it.

    If you repair a totaled car yourself, it’s not as easy as bringing it to an auto body shop, paying for the service and getting back on the road. You’ll be given a salvage title, which can only be lifted once the car is repaired and inspected. Getting a salvaged car inspected can be expensive, and there’s no guarantee that it will pass the test. It’s also much more difficult to insure a rebuilt car after it’s been totaled.

    The takeaway

    • A car is totaled when the cost of repairs exceeds the value of the vehicle.
    • If you have comprehensive and collision coverage, insurance will help you pay for a new vehicle.
    • If you total a leased car or one under a lien, having gap insurance will help you with the outstanding payments.

    If your car is totaled, your insurance company will help you replace the car so you can get back on the road. But the amount of money you’ll get to replace the car depends on what type of policy you have, and if you have new car replacement coverage. If you have a loan or leased car, make sure you have gap insurance to cover the remaining payments if your car is damaged beyond repair.

    Elizabeth Rivelli

    Elizabeth is an insurance writer for coverage.com, where she covers insurance providers and reviews policies to help consumers find comprehensive and affordable coverage for every area of their life. She has more than three years of writing experience for top online insurance and finance publications.

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