What Happens When A Car Is Totaled By An Insurer? (2026)

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.

To understand how your claims adjuster will determine whether your car is totaled, it’s important to first familiarize yourself with a few key terms.

Cost of Repair

After a serious accident, your car insurance company doesn’t automatically agree to cover repairs. Instead, they typically contact appraisers, talk to repair shops and use specialized software to find out how much your car would cost to fix.

Actual Cash Value (ACV)

Your car’s actual cash value (ACV) is how much it’s worth when depreciation is taken into account. Most car insurance policies will pay you the car’s ACV if they refuse to pay for repairs.

In the context of an accident claim, your car’s ACV is its value right before the damage happened. For instance, imagine you bought your car brand-new three years ago for $25,000. You’re involved in a rear-end collision, and the vehicle suffers catastrophic damage.

According to Kelley Blue Book, your car’s value right before the crash was $15,000. If your insurer decides to pay you the car’s ACV, this would be the amount you’d receive.

Salvage Value

The “salvage value” of a car is how much it would be worth when sold to a salvage yard or scrap metal company.

How Does the Insurance Company Determine Whether a Car Is Totaled?

To see if your car is totaled, the insurance company will typically determine the estimated cost of repair and add that number to the salvage value. When this amount exceeds your car’s ACV, the car is usually considered to be totaled.

For example, suppose that your car’s ACV is $10,000. Your vehicle has a salvage value of $3,000, and it will cost an estimated $11,000 to repair it. Because the repair cost plus the salvage value is greater than $10,000, the car is considered totaled.

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.

What if I Want to Keep the Damaged Car?

Normally, if your car is totaled, the insurer will pay you the ACV of the car minus your deductible. But what if you want to keep the car?

In most cases, you can. However, the insurance company will subtract the car’s salvage value from your final settlement. If you’re someone who enjoys working on cars, you may be able to get the vehicle on the road again.

Keep in mind that if you choose this option, the car will be reissued a salvage title. Cars with salvage titles generally won’t be covered by insurance. If you fix the car and have it inspected, though, you might qualify for a rebuilt title, which is generally easier to insure.

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 car accident attorney referral.