Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health insuran...

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager Chris Harrigan

UPDATED: Apr 13, 2022

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Key Takeaways

  • When repair costs are greater than the actual cash value (ACV), a car is considered totaled
  • The insurance company bases the ACV on the vehicle’s market value and depreciation
  • Thresholds for declaring a car totaled vary by state, and the insurance company’s threshold may be lower

Accidents are sometimes unavoidable. Despite all the safety precautions and crash deterrents, we cannot control the behavior of others behind the wheel or prevent ourselves from ever making a careless mistake. You can, however, protect your assets in the event of an accident by purchasing an auto insurance plan. Even if your vehicle is declared a total loss, many insurance plans will reimburse you. But when is a car considered totaled?

Today, we’re going to explore how insurance companies evaluate and appraise the damage to your vehicle after an accident to determine whether or not your car is totaled. Follow along to learn what you can do when your car is deemed totaled.

When is a car considered totaled? 

So how is total loss calculated for a car?

The insurance company may declare your car a total loss if you are in an accident and the damage to your vehicle results in repair costs greater than your car’s actual value.

Each state establishes the threshold for what constitutes a total loss, and insurance companies often set thresholds lower than those of the state. 

Insurance companies may also declare the car a total loss when repair costs do not exceed the vehicle’s value. This is often the case when the vehicle would be unsafe to drive even after repairs are complete. 

Totaled Car Value Calculator: How do insurance companies determine when a car is considered totaled?

Insurance companies will consider a car totaled when the repair costs exceed the vehicle’s actual market value. 

Insurance companies calculate payouts for totaled vehicles based on the car’s actual cash value (ACV). The ACV is the amount at which the vehicle was valued before the loss occurred. Because insurance companies factor in vehicle depreciation, your car’s ACV will be less than you paid for it, even if it’s new. 

Most insurance companies hire third-party inspectors to appraise vehicle damage and estimate repair costs.

The threshold for declaring a car totaled is set by each state and is typically between 60% and 100%. However, because it’s common for body shops to discover additional damage while completing repairs, insurance companies often establish the threshold lower than that of the state.

If you live in the state of New York, the threshold for declaring a vehicle totaled is 75%. If your vehicle’s ACV is $20,000, insurance companies must legally declare your vehicle a total loss if the repair costs exceed $15,000. However, if your insurer has set its threshold at 60%, the company will consider your car totaled when the repair costs are more than $12,000.

Vehicle damage is frequently much worse than is initially apparent, and it’s common for additional damage to be discovered when repairs begin. As a result, insurance companies will often deem a car totaled when the repair costs are much less than the vehicle’s ACV. 

How much money will you receive when a car is considered totaled?

The amount of money you will receive from the insurance company when your car is considered totaled depends on your vehicle’s ACV and your insurance company.

To calculate the ACV, your insurance company factors in vehicle depreciation, wear and tear, mileage, and any prior accidents involving the vehicle. 

The insurance company sends an adjuster to visually inspect your car after an accident and to appraise the cost of the repairs. If you believe that the company misrepresents your vehicle’s value, you can dispute the payout. However, you must provide the company with proof, and you may need to hire a private appraiser to inspect your vehicle.

Can you declare your car totaled?

You cannot declare your vehicle a total loss. Only your insurance company can decide what your car is worth and whether or not to total it. 

To be considered totaled, the damages to the vehicle must exceed its actual cash value, the insurance company’s threshold, or be so severe that the vehicle is ruled unsafe. The insurer’s total loss car value calculation will include an adjustment for depreciation and the physical condition of the car.

What to Do When a Car Is Considered Totaled

If you are involved in an accident and suspect that your car is totaled, these are the steps you need to follow:

  • File a claim. The first step is to contact your insurer to file a claim just like you would for a minor accident.
  • Appraise the damage. The insurance company will send an adjuster to assess the vehicle damage and estimate repair costs.
  • Know your car’s value. The insurer will use the vehicle’s ACV. You must research and know what your vehicle is worth to avoid confusion.
  • Contact your lending agency. You must notify your lender of the loss. You are required to continue making payments to avoid hurting your credit score. The insurance company will send the payout to your lender after the claim is settled.
  • Negotiate the claim. You must agree with your insurer on the payout. Suppose you believe that the ACV provided by your insurance company is too low. In that case, you have the option to dispute the payout by hiring a private appraiser and presenting evidence of your car’s value to the company.
  • Shop for a new car. Your insurance payout will not be enough to purchase a new version of your totaled car, but you can use this money to purchase a new vehicle.

After your car is deemed totaled, you may have the option of repurchasing the vehicle. You will need to contact the DMV to secure the necessary paperwork, and you must repair the car before you can drive it on the road. If you complete the repairs for a totaled vehicle, state law requires you to register the vehicle with a rebuilt or salvaged title.

Some insurance companies will only issue liability coverage for vehicles with rebuilt or salvage titles.

Alternatively, you can elect to retain your totaled car for parts, sell it to a scrapyard, or donate it to a charitable organization.

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Insurance Coverages for When a Car Is Considered Totaled

Depending on the loss category, various insurance coverage types might cover a totaled car. The four types of insurance that most commonly cover totaled vehicles are:

  • Collision insurance. This type of policy covers damages caused by hitting another car or object.
  • Comprehensive coverage. Comprehensive car insurance covers the costs of damages caused by non-collision events, such as natural disasters, animals, vandalism, and theft.
  • Property damage liability. If you’re involved in an accident caused by another driver who has insurance, their property damage liability coverage should cover the costs of your totaled vehicle.
  • Uninsured/underinsured motorist coverage. This type of insurance plan protects your assets if you’re involved in an accident caused by a driver without insurance. 

If you purchased your car using an auto loan or you have a lease, the lending agency will usually require you to have collision and comprehensive insurance on your vehicle. These coverages are optional if you do not have a loan, and most states only require a minimum level of liability insurance.

Liability insurance, however, leaves you at risk. A liability policy alone will not compensate the damages when your car is considered totaled. 

GAP Insurance for When a Car Is Considered Totaled

Your new car will depreciate the moment you drive it off the lot. As a result, if you have a loan, your vehicle’s ACV might not cover the entire amount you owe. 

GAP car insurance is a standard solution to this problem. GAP coverage works by paying the difference between what your insurance policy will cover and the money you still owe on your loan or lease. Many insurance companies even offer GAP insurance that covers the costs of comprehensive or collision deductibles.

Final Thoughts on When a Car Is Considered Totaled

The insurance company may consider your car a total loss if the repair costs exceed the vehicle’s actual cash value (ACV). The insurance company determines the ACV by factoring your car’s depreciation into its market value. 

Thresholds for declaring a car totaled are established by individual states, and it’s common for insurance companies to set their thresholds slightly lower than the state to allow for the discovery of additional damages during repairs.

The insurer will send an adjuster to visually evaluate the damages to your vehicle and estimate the repair costs. You may dispute the adjuster’s estimate if you wish, but you must provide the company with proof of your vehicle’s value.

You must know what your vehicle is worth to ensure that you receive the appropriate payout. As always, remember to research your situation thoroughly so that your assets are best protected.