Total Loss Car Insurance

Learn the ins and outs of car insurance after a total loss.

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Total loss car insurance

 

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.

 

  1. How is a total loss determined?
  2. Can you disagree with a total loss decision?
  3. What happens if you have a loan on your vehicle?
  4. Rebuilt title insurance
  5. Should you buy a salvaged car?

 

 


 

What is a total loss?

 

A total loss determination 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, Delaware, Georgia, Hawaii, Idaho, Illinois, Louisiana, Maryland, Minnesota, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, South Dakota, Utah, Vermont, and Washington are "total loss formula" states.

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

 


 

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 adjustor 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 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 as 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.




 

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 don’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.

 


 

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 vehicle to better understand the repairs made in step two.

 

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 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.

 

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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.

 

TOTAL LOSS THRESHOLDS BY STATE
StateCost Needed to Declare Total Loss
Alabama75%
Arkansas70%
Colorado100%
Florida80%
Indiana70%
Iowa75%
Kansas75%
Kentucky75%
Maine75%
Massachusetts75%
Michigan70%
Mississippi80%
Montana75%
Nebraska65%
Nevada50%
Nevada50%
New Hampshire75%
New York75%
North Carolina75%
North Dakota75%
Oklahoma60%
Oregon80%
South Carolina75%
Tennessee75%
Texas100%
Virginia75%
West Virginia75%
Wisconsin70%
Wyoming75%

Recent Questions:

Total Loss Car Insurance

Will we have trouble registering a car that was declared a total loss?

Unfortunately, I won't be able to tell you about the registration. You will need to contact the DMV for that information.

My "totaled" car was barely damaged. Is it still possible to get full coverage on it?

Hello, Car insurance companies typically total a car when it costs more to repair it than what the car is worth. Since it has already been totaled, it's highly unlikely that a car insurance company would be willing to give you full coverage (comprehensive and collision) for a rebuilt title vehicle.

My insurance company held me 10% responsible for not taking "evasive action." Will the 10% charge likely cause a higher rate elsewhere?

Anytime you are found liable in an accident it will impact rates. In this case, you were only found 10% liable, so it will not impact your rates as much as if you were 100% liable.

Can I get insurance for a car with an accident report?

Yes, you can buy a vehicle that has been in an accident. If the car has a salvaged title, you may not be able to add "full coverage" (comprehensive and collision coverage) so make sure to check with the company you decide to go with.