What Happens When A Car Is Totaled By An Insurer? (2025)

What Is a Total Loss Vehicle?

A total loss is an insurance term that means the insurer will not pay to repair the vehicle. Instead, it will compensate you for its value. How does insurance determine if a car is totaled? Insurers use the following two measurements to decide whether to total vehicles after car accidents:

Your Car Cannot Be Repaired

Your car might suffer irreparable damage in the crash. For example, your vehicle might catch on fire, burning it to its frame. While a mechanic might be able to rebuild it, those efforts would go far beyond repairs because many of the parts might require replacement. In this case, the insurer would pay you simply because it cannot be repaired.

Your Car Repair Costs Exceed Its Value

The more common ground for totaling a vehicle occurs when the repair costs exceed its value. Insurance companies are not motivated to help you after car and truck accidents. Instead, they are there to earn profits. In selling you an insurance policy, the company can do both, but it will ultimately handle your claim based on its financial calculations rather than your preferences.

Thus, the insurer will calculate the actual cash value (ACV) of your vehicle based on its age and condition. It will then gather repair estimates to determine the repair costs. The insurer will always pay the lower amount. If your repairs are less than the ACV, the insurer will pay to fix your car. If the ACV is less than the repairs, the insurer will total it and pay the ACV.

How Much Will Insurance Pay for My Totaled Car?

The ACV is the current market value minus depreciation. The current market value is determined using databases, like Kelley Blue Book, that track how much you would spend to buy the same make, model, and year to replace your vehicle.

However, the insurer does not want to overpay for vehicles in poor condition. Thus, it will subtract amounts from the current market value to reflect pre-crash damage and malfunctions. These amounts, called depreciation, usually come from a discussion with you about the condition of your vehicle and an inspection.

For example, suppose that you drove a five-year-old vehicle involved in a crash. You could buy the same vehicle for between $10,000 and $12,000 on the market. The claims adjuster will call you to discuss its condition and may determine it was in good, but not excellent, condition.

The insurer will choose a value within the range, such as $11,000, to reflect its ACV. It will then pay you that amount minus any deductible you chose when you bought your auto insurance policy. Thus, if you have a $2,500 deductible, the insurer will pay you $8,500. Notably, you do not pay any deductible when the other driver’s insurer pays you under their property damage liability coverage.

Which Insurance Company Pays?

The insurance company responsible for paying your claim depends on what happened and the coverage you have. If the other driver negligently caused the accident, their insurer is liable for your property losses. Negligence examples include running red lights and tailgating.

If you caused the crash and have no collision coverage in your policy, you bear the loss. In other words, you will not receive any insurance payout. How does full coverage insurance work if a car is totaled? If you caused the crash and have collision coverage in your auto policy, your insurer is liable for your property losses. You can also file a claim under your collision coverage if the other driver caused the crash but had no insurance.

If My Car Is Totaled, Will the Insurance Pay It Off?

Suppose your car is relatively new, and you have an auto loan. The loan balance is irrelevant to determining the ACV. The insurer will determine your payout regardless of how much you owe on the vehicle.

This fact inevitably leads to the question, “What happens if you total a financed car with full coverage?” When you have collision coverage, the insurer will pay the ACV to the lien holder. It is then up to you to make up the difference between the ACV and the loan balance. For example, you owe the lender $5,000 if your ACV is $15,000 and the loan balance is $20,000, even though the car has been destroyed.

You can buy gap insurance to protect you from this scenario. A gap insurer steps in and pays off your loan if the loan balance exceeds the ACV.

Contact ConsumerShield to Learn More About Your Rights After an Insurer Totals Your Car

The amount you get paid after an insurer totals your vehicle is negotiable. ConsumerShield helps you understand your position and find legal representation to help you negotiate a fair deal. Contact us for a free case review and an accident attorney referral.