Total Loss Car Insurance

Learn the ins-and-outs of car insurance after an incident resulting in a total loss.

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What is total loss car insurance coverage?

Totaling your car is, to put it eloquently, a pretty big bummer. Even if you’re left uninjured, the mess of logistics that follow suit is confusing and hectic during an already stressful time. The actual meaning of total loss, how it’s determined, whether or not you can dispute that determination, and what comes next are all questions that arise after a vehicle has been totaled. Fortunately, these are the questions we'll cover below.

A guide on total loss auto insurance — table of contents:
  1. How is a total loss determined?
  2. What is a salvage title car?
  3. What happens when your car is a total loss?
  4. How do insurance companies value cars?
  5. Can you disagree with a total loss decision?
  6. What happens if you have a loan on your vehicle?
  7. Frequently asked questions




What is a total loss?

What makes a car a total loss varies by state. Basically, there are two schools of thought: total loss formula states (TLF) and total loss threshold states (TLT). For a total loss threshold state, it will work like this:

  • Your insurance company's claim adjuster will determine the total cost of repairs plus the scrap value of the car.
  • They will then determine the actual cash value (ACV) of the vehicle before the accident.
  • If the value of the total cost of repairs plus the scrap value is greater than or equal to the ACV, your insurance company will total the vehicle.

In total loss threshold states, outlined here, a vehicle is determined to be totaled if the value of the damages exceeds a certain point. This “threshold” is valued as a percentage and varies a bit between states. Iowa has the lowest threshold, meaning the least dollar amount needed to total the vehicle at 50% whereas Texas has the highest at 100%.

The remaining states, Alaska, Arizona, California, Connecticut, DelawareGeorgia, Hawaii, Idaho, Illinois, Louisiana, Maryland, Minnesota, Missouri, New Jersey, New Mexico, Ohio, PennsylvaniaSouth Dakota, Utah, Vermont, and Washington are "total loss formula" states.

After your vehicle has sustained significant damage, your car insurance company will evaluate the vehicle and determine if it is indeed a total loss.



What is a salvage title car?

A salvaged vehicle, also known as a salvage title, is the end result of a total loss. While the exact procedures are governed by your state’s DMV, after a total loss decision by your insurance company, your DMV will issue a “salvage certificate.” This will prohibit you or anyone else from driving the salvage car as it has been deemed unsafe and not roadworthy for public use.

Can I get rebuilt title insurance?

Because salvage vehicles are unfit for use on public roads, they are not eligible for auto insurance. However, if you or your insurance company decide to repair the vehicle, get it re-inspected, and registered, it will be branded a rebuilt title vehicle and may be eligible for rebuilt title insurance.

Rebuilt title insurance is likely to be handled differently than standard insurance policies. Because of the nature of salvage and rebuilt titles, many insurance companies will flat-out deny you coverage. The risks rebuilt cars present are deemed too high for many insurance companies. If your insurance company does agree to provide coverage, it will typically only be liability coverage. Full coverage — which is made up of comprehensive and collision coverage in addition to liability insurance — is rarely an option for rebuilt title vehicles.

Your best bet for finding rebuilt title car insurance is to be upfront with insurers. This way, you won’t waste time with companies that won’t offer any insurance coverage. An insurance company will find out if the vehicle has been totaled and repaired anyway, so there isn’t much reason to withhold this information.

Tips on buying a salvage title vehicle

Salvaged vehicles tend to be a lot cheaper than non-salvaged ones with clean titles. Because of this, they have a great allure for buyers on a budget. But there are some things you need to consider if you’re going to buy a vehicle that has been salvaged.

Do a VIN check

If a car has been salvaged, it will be listed on the vehicle history report which you can check via the VIN or vehicle identification number. You should do this with any vehicle you're thinking of buying, regardless of the title status.

Get it inspected

Do not buy a vehicle that hasn’t been inspected by your preferred mechanic. It’s pretty clear why: you want to ensure all the repairs have been made properly and there aren’t any underlying issues with the vehicle.

Get original total loss declaration or repair information

This will help determine what actually happened to the salvaged car to better understand the repairs made in the previous step.

Do your own research on the vehicle

If you’ve made it this far with the vehicle, compare the value of the vehicle to what’s listed on NADA online or Kelley Blue Book. If you’re buying from an independent buyer — say, the former owner — you might be able to negotiate the price. Moreover, do research on the buyer to see if there are any red flags in his or her past concerning selling salvaged vehicles.

Get insurance quotes ahead of time

As long as you have the VIN, you're able to get quotes prior to purchasing the vehicle. As we discussed, getting insurance on a vehicle with a salvaged title can be tricky. In order to legally drive away with the vehicle, you'll need insurance. So plan to get some quotes ahead of time to avoid any issues.



What is the total loss settlement process?

Totaling your car can be a perplexing and overwhelming time, especially if you're not sure how to navigate the claims process for such a sizable, impactful loss. Let's review what the typical total loss settlement process is like, from start to finish, but keep in mind that your experience may vary due to differing circumstances.

1. File a claim with your insurance company.

If you were not-at-fault in the accident and you file a claim with your insurer, they will likely seek reimbursement from the at-fault party's insurance company to cover the loss. In some cases, you may be able to recoup your deductible.

2. Get your vehicle inspected for damages.

The insurance company will send a claims adjuster to review and assess the damage sustained by your vehicle. If you have rental car coverage, this would be the time to receive your rental vehicle to cover your transportation.

3. Total loss declaration and settlement offer.

The adjuster will contact you and may ask you to confirm certain details or features of your vehicle's make, model, and trim before finally offering a settlement, i.e. what they think your totaled car is worth in terms of actual cash value. You will need to accept the settlement to proceed, but you may be able to negotiate. This would also be a fitting time to start looking for a replacement vehicle.

4. Is your car owned, financed, or leased?

If it's owned: Find the title to your vehicle, clear out personal belongings in the car, and drop it off at the designated location requested by your insurance company.

If it's financed or leasedClear out personal belongings in the car, and drop it off at the designated location requested by your insurance company. If you have gap insurance or loan/lease payoff coverage, confirm your insurance will cover what's remaining on your loan or lease.

5. Receive payment and settle the claim.

The insurance company will issue you a check to pay out for your total loss claim (minus your deductible). If your car was financed or leased, the check could be addressed to your lender or made out to both you and your lender for you to sign and send to your financing company.



How do insurance companies value cars?

If you've ever been offered a payout for your totaled vehicle, it's likely that you were curious how they came up with that amount. It's hard to pin down exactly how insurance companies come up with their payout number, as your car's value could vary greatly from one car insurance company to another. However, while the end result can be quite different, the valuation process remains largely the same.

A claims adjuster assesses the damage to your vehicle after an insurance claim is filed. Afterward, they'll factor in your car's age, mileage, and any previous accidents or damage. The company will also look at similar models in your area and consult Kelley Blue Book to get a sense of its pre-claim value. The process is similar for stolen vehicles — though there is obviously no damage to assess. This information is used to ultimately determine the value of your car.

The amount proposed by the adjuster should only be considered an initial offer. Expect this offer to be lower than you think it should be. However, you can take steps to negotiate with your car insurance company to increase the payout amount. Read on to see ways that you can work with your insurer to negotiate for a payout that is closer to the market value of your vehicle.



Can you dispute a total loss?

If you feel your insurance company undervalued your totaled car, you have some options that may help.

  1. Request documentation regarding the total loss and look for any inaccuracies.

    Your insurance company will determine the value of your vehicle as well as the value of the repairs. Make sure the documentation correctly states the mileage, vehicle age, and any additional non-standard features you might have. Next, you’ll want to compare the value listed by your insurance company with other sources. Kelley Blue Book and NADA are good resources for that.

  2. Gather all your paperwork regarding the vehicle such as information from the previous owner, mechanical reports, repairs, upgrades, etc.

    This will further help present your side of the argument that the vehicle was undervalued.

  3. Present any inaccuracies to your insurance company.

    If you're able to find inaccuracies with the report, speak with your car insurance company's claims department or the claims adjuster assigned to you.


Totaling your vehicle when you have a loan

If you’re leasing or financing your vehicle, totaling your vehicle can have major implications. Within your lease agreement, you’re required to maintain the vehicle in near perfect condition. And, as you can imagine, totaling the vehicle falls way outside those lines. Moreover, if you have a loan on the vehicle and the vehicle is totaled, you could find yourself in a situation where you owe more than the vehicle is worth.

Luckily with leased vehicles — and sometimes if you’re financing — your agreement often requires you to carry gap insurance. Gap insurance is designed for situations where the loan on the vehicle is worth more than what your insurance company will pay you for the total loss. Because of the nature of vehicles, your car's value depreciates rapidly the longer you own it. And with most kinds of insurance, you will only be paid the actual cost value of your asset — not what you originally paid for it. So, if your loan is $25,000 and your vehicle is totaled, but you only receive $20,000 because that is what your vehicle is valued at, gap insurance would step in to cover the remaining $5,000.

If you do not have gap insurance but Loan/Lease Payoff Coverage, you can also find help. Loan/lease is similar to gap insurance but typically has a coverage cap. So, while gap insurance will cover the difference between what you receive and what you owe, this coverage would only cover a certain percentage of that value. While it can vary by company, Loan/Lease Payoff coverage typically exhausts at 25% of your vehicle's value. Because of this, gap insurance is generally considered a more overarching solution to this problem.


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Frequently asked questions: total loss car insurance

Below are some common questions about total loss and auto insurance for your reference. If you have any additional questions, feel free to submit them to our insurance experts here.

If my car is declared a total loss, can I still drive it?

No. Even if you feel your car is in driveable condition after a total loss declaration, it's simply not safe to drive such a damaged vehicle on public roads.

Are there any insurance companies that will insure a totaled or salvaged vehicle?

There is no guarantee that insurers will cover a totaled car — and in fact, it may be difficult to find coverage. Your best bet is to shop around with as many companies as possible before finalizing a purchase or holding onto a salvage title car.

When should I remove the totaled car from my insurance policy?

You can remove the totaled car from your policy once the title or lease is no longer in your name and you've been paid for the claim.

Can you keep your car if it's totaled?

It depends on the salvage laws in your state, so ask your insurance company about your state's rules. If it's allowed, your insurance provider will still pay out for the claim but the final amount will be adjusted; on top of your deductible, they will likely deduct the amount your car could have sold for at a salvage yard.



Total loss formula states

If you live in one of the states listed below, a vehicle will be declared a total loss if the value of the repairs is greater than the percentage listed in the right column.

State Cost Needed to Declare Total Loss
Alabama 75%
Arkansas 70%
Colorado 100%
Florida 80%
Indiana 70%
Iowa 75%
Kansas 75%
Kentucky 75%
Maine 75%
Massachusetts 75%
Michigan 70%
Mississippi 80%
Montana 75%
Nebraska 65%
Nevada 50%
New Hampshire 75%
New York 75%
North Carolina 75%
North Dakota 75%
Oklahoma 60%
Oregon 80%
South Carolina 75%
Tennessee 75%
Texas 100%
Virginia 75%
West Virginia 75%
Wisconsin 70%
Wyoming 75%




The driver who's car I hit won't return my calls

It would fall on the other party to file the claim. It sounds like you have done everything you can to make sure they could have resolved this.
Jun 7, 2018 Alexandria, VA

Should I contact my insurance company about this fender bender?

Most insurance companies require you to report any incident involving damage to a car or property. Even if you decide to not file a claim, you still want to let your insurance company know, that way you are protected if the other party decides to file a claim.
Aug 30, 2018 Kingsland, GA

Parked car hit by a fedex truck

This can depend. Usually, the moving vehicle is found at fault for damage caused by a stationary vehicle, as you're required to be in control of your vehicle at all times.
Jun 23, 2018 Austin, TX

Will my insurance company pay for damage that I caused if my policy is cancelled?

If your policy was active at the time of the accident then they should still provide coverage for the damage. You can contact your insurance company or just wait for the person who owns the damaged property to contact your insurance company for repairs.
Dec 19, 2016 Grand Junction, CO

Ava Lynch photo
Ava LynchSenior Analyst

Ava worked in the insurance industry as an agent for four-plus years.

Ava currently provides insights and data analysis as one of The Zebra's property and casualty insurance experts. Her work has been featured in publications such as U.S. News & World Report, GasBuddy, Car and Driver, and Yahoo! Finance.

About The Zebra

The Zebra is not an insurance company. We publish data-backed, expert-reviewed resources to help consumers make more informed insurance decisions.

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