Total Loss Car Insurance

You may think that total loss car insurance will replace your car after an auto accident. Unfortunately, your car insurance total loss payout is based on actual cash value of your vehicle, which is often less than you think. Car insurance that covers a total loss is collision insurance, and if you have collision insurance coverage, it may not provide enough to replace your auto. You can negotiate with auto insurance adjusters, but may need to consider whether total loss car insurance is worth paying for.

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Chris Tepedino is a feature writer that has written extensively about auto insurance for numerous websites. He has a college degree in communication from the University of Tennessee and has experience reporting, researching investigative pieces, and crafting detailed, data-driven features. His works have been featured on CB Blog Nation, Flow Words, Healing Law, WIBW Kansas, and ...

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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 in...

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Reviewed by Rachael Brennan
Licensed Insurance Agent Rachael Brennan

UPDATED: Jul 19, 2021

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What is total loss car insurance? Do you need it? And how do you know the difference between this type of insurance coverage and other coverages which may seem similar?

Total loss auto insurance isn’t necessary for every driver. In fact, it may only really apply to a minority of car owners.

But if you’re worried about whether or not total loss car insurance is for you, then keep reading and find out more information down below.

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What Is a Total Loss, When it Comes to Car Insurance?

If you are involved in an accident and your vehicle is severely damaged, total loss coverage may come into play. But there are certain factors which must all fall into place in order to file a claim against your total loss coverage:

  • The accident must be the other driver’s fault (meaning their Property Damage Liability coverage will pay out the claim), or
  • You must have Collision coverage (if the accident was your fault), and
  • Your vehicle must be damaged beyond repair

The phrase “damaged beyond repair” is an important legal term in determining the total loss claim. In order to calculate this number, you have to consider the cost of repairs vs. the actual cash value of the vehicle.

If the cost of repairs is more expensive than the latter, then the vehicle is written off as a total loss and a check is cut to you for the actual cash value of the car.

However, this can become problematic if you are driving a relatively new vehicle – especially if you are still paying for that vehicle with an auto loan from your bank.

The difference between the actual cash value of a vehicle which is less than 4 years old versus the actual cash value of that vehicle when it was brand new can be thousands of dollars.

And without total loss insurance, those thousands of dollars may end up becoming your financial responsibility.

Average Auto Insurance PremiumsLegend: Without Total Loss Insurance With Total Loss Insurance ArkansasMassachusettsKansasMissouriNebraska 153045607590105120135150165180195210$123$187$117$201$101$174$149$216$81$147

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Putting a Total Loss Vehicle Out to Pasture

There are steps you need to take after your car is severely damaged and your insurance company deems it a total loss.

If you disagree with the status and still want to see your car repaired, or if you think the amount they offered you is unfair, you can dispute the claim. But that will take time, energy, and may require getting lawyers involved.

It could be more cost-effective to swallow the loss and lose the vehicle than to fight a protracted legal battle – especially if getting a new mode of transportation and getting back on the road as fast as possible is important to you.

If you are happy with the claim resolution, then your claims adjuster will require the following from you:

  • All associated paperwork filled out and ready to file
  • Your physical car key, and any copies, must be sent to your claims adjuster
  • Make sure any and all personal items, including the license plate(s) are removed if you have not done so already
  • If your vehicle was leased, be sure to contact them and keep them in the loop during the entire claims process

Once these preliminary stages of the process are completed, your insurance provider will take possession of the car, notify the DMV, and re-classify it as a “salvage” vehicle.

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At this point, it may be sold off for scrap or to anyone who thinks they can restore the vehicle back to working order.

You may choose to keep the vehicle for whatever reason, but the settlement on your claim will be reduced (sometimes drastically).

Even as a total loss, your salvage vehicle still has financial value which your insurance provider will miss out on if they return your damaged vehicle to you.

There are also rules and regulations – which vary by state – about whether or not you are allowed to repossess a salvage vehicle, and whether or not you need to obtain certificates or special insurance coverage in order to keep it.

Average Auto Insurance PremiumsLegend: Without Total Loss Insurance With Total Loss Insurance AlabamaFloridaTexasWisconsinColorado 153045607590105120135150165180195210$83$142$166$176$116$172$137$180$162$210

Total loss coverage for a younger vehicle may be purchased with your insurance provider. It is often referred to as gap coverage, but different companies may refer to it by different names.

If you have gap coverage and your vehicle is totaled in an accident, they will either cut you a check for how much the vehicle cost when it was brand new, or they will pay out a claim equal to the dollar amount you would need to purchase an identical — but slightly used — version of your totaled vehicle.

Some gap coverage policies will only offer one option over the other, while others may be more flexible and offer you both. The latter, however, is usually more expensive.

As a final word, rest assured that if you are driving an older vehicle, a vehicle with a slow depreciation rate, or a vehicle that would be relatively inexpensive to replace, you shouldn’t worry about purchasing gap coverage.

The odds are good that if your vehicle is rendered a total loss after a serious accident, your insurance company will pay enough out on the claim to keep you out of serious financial trouble.

And if you’d like to know which insurance companies our best at this – and at the most affordable price — just give our handy quote tool a chance to find the best providers near you.

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