Is it bad if your auto insurance company totals a car?

It is not necessarily a bad thing if the insurance totals a car. You could be rewarded a settlement to replace your vehicle, but you should always do your due diligence and verify that the first settlement offer is adequate. You can always negotiate with your insurance company if it isn't. Is it a bad if the insurance totals a car? Not if you're prepared.

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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

UPDATED: Aug 25, 2021

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Can't-Miss Facts

  • Your vehicle is regarded as being totaled if the repairs cost more than the vehicle itself, if it can’t start, or if it is unsafe to drive
  • If you owe money on the vehicle, your insurance company will pay your lender
  • You can negotiate with insurance companies if you don’t think the settlement amount is appropriate

If you need affordable auto insurance, is it bad if the insurance totals a car after you’ve been in an accident? While it may be very inconvenient to lose your vehicle to an accident, it is not a necessarily bad thing if your insurance company declares it a total loss.

Of course, there are other impacts to consider when your vehicle is totaled. And if you’re thinking of comparing auto insurance quotes, is it bad if the insurance totals a car? Not at all.

If your vehicle has been totaled and you’re beginning to shop for a new set of wheels, this is the perfect time to compare quotes. This way the cost of your automobile insurance won’t catch you by surprise when you go to drive your new car off the lot.

Enter your ZIP code to receive free quotes from companies near you if you’re asking yourself, “Is it bad if the insurance totals a car?”

What does it mean when a vehicle is totaled?

If you were in an accident, your instinct may be to ask your auto insurance company, “Is it bad if the insurance totals a car?” Well, the first thing your insurance company will have to do is determine if your vehicle is totaled.

There are three main parameters used to determine if a vehicle is totaled:

  • Cost of repairs
  • If repairs can be made
  • If the vehicle is safe to drive
  • State law

When the total cost of repairs needed to make a vehicle run again is more than the value of the vehicle itself, then the vehicle is considered totaled.

Your vehicle may also be considered totaled if the damage is so bad that it cannot be repaired or if said damage makes your vehicle unsafe to drive.

Certain states have laws that determine when a vehicle is totaled. If, for example, you live in New York and the estimate to repair your damaged vehicle surpasses 75% of its value, your vehicle is considered total.

On the other hand, if you live in Texas, the repairs must either match 100% of your vehicle’s value, while in Iowa, a vehicle is considered totaled when damages only hit 50% of the vehicle’s value.

But be aware, in states without this low of a threshold, insurance companies will employ their own formulas to determine if your vehicle is totaled.

How can drivers tell if their vehicle is totaled?

If you’ve been in an accident, trying to ascertain if your vehicle is totaled may be the last thing on your mind. Don’t worry, your insurance company will take care of that for you.

If you would like to be kept abreast of the situation with your vehicle, you can always contact your insurance company for more information. If you do, ask these questions:

  • Is the vehicle able to be driven?
  • How much are the repairs going to cost?

If you learn that the car won’t start or if a mechanic estimates that the repair costs are higher than the Kelley Blue Book value of your vehicle, it’s safe to say that your vehicle is totaled.

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What happens when insurance totals your car?

If you were to ask your auto insurance company, “Is it bad if the insurance totals a car?”, you would most likely be told that a few factors feed into that answer.

If, for example, the damage to your car was caused by an accident, your insurance company will have to ascertain if they or the other party’s insurance will manage the payout.

Bear in mind that if you will be negotiating with another person’s insurance company, the process can be a bit difficult. It’s a good rule of thumb to never accept the first settlement offer you receive without doing your due diligence and looking everything over.

Once you accept a claim settlement offer, the insurance company takes control of your vehicle; when you accept the settlement, you have essentially sold your vehicle to the insurance company. Typically, the insurance company then sells the car to a salvage yard.

If you’re the one who caused the accident, and have more than state-minimum insurance coverage, your insurance company will pay the other party for any sustained damages, and you will be able to file a claim to get your own vehicle repaired.

If you do not have collision coverage, you will be responsible for the cost of repairing your car.

What happens when your car is totaled and you still owe money?

Many drivers take out a loan to pay for their cars, which means that the car does not technically belong to them until it is paid off. There’s no need to worry if your car is totaled in an accident though.

As long as you are an insured driver, your insurance company will pay your lender for the vehicle’s value, although you should be aware that if the amount given to your lender doesn’t meet the total loan amount, you will be on the hook for any remaining balance.

What does your insurance company pay when a car is totaled?

You may be wondering how you get insurance to pay totaled car costs. Your insurance company may take one of these three steps:

  • Use their in-house total loss value calculator to find you a comparable vehicle
  • Offer you a cash settlement that is based on the actual cash value of similar vehicles
  • Present a cash settlement based on alternate appraisal methods

It all depends on the state where you live and which insurance company you are working with.

How can drivers dispute a payout with an insurance company?

If you disagree with an insurance company’s settlement amount, you can dispute it. Here are the steps you should take if you would like to begin that process:

  • Don’t settle
  • Ask for more information
  • Review the calculations
  • Get estimates
  • Hire an appraiser

If you think the insurance company has offered you too little, you don’t have to accept the first settlement offer. You can negotiate the value of your vehicle with your insurance company.

Request a total-loss report from your insurance company. You’ll find your vehicle’s market value, comparable auto data, and the estimated damages all outlined in this document.

Once you have your hands on the total-loss report, inspect the calculations to determine if they gave your vehicle a fair market value and if there is an accurate representation of the damage estimate.

Find out the costs of vehicle repairs. If possible, get at least one estimate and compare it to the insurance company’s report.

If you suspect that the payout from your insurance company is off the mark, you can hire an appraiser. Be aware though, that cost of hiring an appraiser will come out of your own pocket, so this step should be a last resort.

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If my insurance company totals my car, will that affect my rates?

No, as long as you weren’t at fault in the accident. Of course, if you were to file a claim, you may lose a claim-free discount, and if you were at fault, you could lose a good driver discount.

If you were to replace your vehicle with a similar one, you could see rates that were close to what you were playing before; however, if you decide to buy a brand new, state-of-the-art ride, your rates would most likely rise.

Your Auto Insurance Company Totals Your Car: The Bottom Line

If your vehicle is totaled, your insurance company will use an in-house tool or an alternative appraisal method to calculate a settlement offer for you, but if you suspect that the payout from your insurance company is off the mark, you can always take steps to fight the decision.

A totaled vehicle can interrupt your life, so it’s always best to have adequate insurance. That way you will be able to get a rental car so you can get wherever you need to go as you wait to receive your settlement.

Now that you know more about if it is bad if the insurance totals a car, enter your ZIP code to receive free insurance quotes today.

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