What Happens When a Car Is Deemed a Total Loss?

Did you know that in the U.S., an average of 13 car accidents occur every minute? They’re such a massive burden that, in 2020 alone, they cost the U.S. economy $474 billion.

Total loss incidents, in turn, are a significant driver of such economic losses. After all, once you total a car, you can no longer drive it, except if you pay loads to get it fixed.

But what exactly does total loss mean, and what happens to a totaled car? Will you get compensation if you total your car?

We’ll answer all those questions below, so keep reading.

What Does Total Loss Mean?

Total loss is a term that refers to a vehicle that is no longer repairable or costs more to fix than what it’s worth. A totaled car often results from a severe car accident, such as a head-on collision. Likewise, flooding incidents can also result in a vehicle classifying as totaled.

What Happens if You Totaled Your Car?

You can file a car insurance claim if you totaled your car and have collision insurance. Your insurer will pay you an amount equivalent to the car’s actual cash value (ACV). To calculate the ACV, subtract depreciation cost from your car’s replacement cost value.

Some states also allow insurers to replace totaled vehicles instead of making payouts. In this case, the replacement should be comparable to your totaled car just before it got damaged.

Another way to get an insurance payout for a totaled car is to file a property damage liability claim. It’s mandatory in all states, but you must file it against the other driver’s PD. In addition, you must prove the other driver caused the accident through negligence.

What Happens to Your Totaled Car?

If you agree to the payout, the insurance company will take ownership of your totaled car. After that, it will get a branded title, indicating the vehicle is a total loss. They can then auction or sell it to salvage or junk yards.

Can You Keep a Totaled Car?

In most cases, you can, but the odds are your insurance payout will be smaller. One reason is that your insurer will likely deduct your vehicle’s salvage or junk value from its ACV. The salvage or junk value is the amount you can get from selling the entire car or its parts to a salvage or junk yard.

So before you decide to keep your totaled car, think about the costs of doing so. For example, if you want to get it back on the road, you must spend money on inspections and repairs. Then, you have to get it reinsured before you can start operating it again.

Still, you might want to keep your car if you want a tax deduction by donating it to a charitable organization. Another reason is if you want to rebuild it as a side project.

Avoid Total Loss by Driving Safely

As you can see, a total loss can leave you with a car that can either be irreparable or too expensive to fix. And even if you get a payout, expect it to be much less than what you paid for when you bought your ride.

All that should be a good enough reason to drive safely to lower your risk of getting into a crash. Don’t forget to buy collision insurance, too, as extra protection.

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