Getting Insurance After a Total Loss Vehicle

Understanding your settlement options matters, and so does getting your next car insured without a gap. When you are ready, get a free auto insurance quote.

When your vehicle is in a car accident or a comprehensive loss and is damaged to the point that it would cost more to fix the car than it is worth, an auto insurance company will determine that your car is a "total loss." When your car is a total loss, the insurance carrier will determine your car's value at the time of the loss, and you will be paid accordingly if you agree to the amount they propose.

When an insurance carrier deems your car a total loss, they take into consideration the vehicle's actual cash value but also the additional costs that the company would incur if the car were repaired, such as the cost of providing you with a rental car while yours is being fixed and the amount of money they insurance company can sell the salvaged vehicle for.

An insurance company will determine your vehicle's actual cash value, including the amount it has depreciated since it was new. The carrier will use tools such as Kelley Blue Book , recent sales of similar vehicles, and the cost of work you have put into the vehicle recently (i.e., new tires or new brakes) to determine that value.

If the insurance company determines that the repair estimate is more than your car is worth, it will declare the car a total loss and offer you a settlement amount based on that value.

If you were at fault in the accident, you will be paid the agreed-upon amount minus your comprehensive or collision deductible that you selected when you purchased your car insurance coverage. If you were not at fault in the accident, the insurance company representing the at-fault driver will pay you the total agreed-upon amount.

If you agree with the insurer's proposal for an actual cash value settlement, you will be asked to sign the vehicle's title to transfer ownership to the insurer and send it to the claim adjuster before payment can be released to you.

You may disagree with the settlement that the insurer is proposing. If this happens and you and the claim adjuster cannot agree on an acceptable amount for both of you, you can keep the vehicle and accept a lesser amount from the insurance carrier.

The amount is less than the actual cash value because the insurance carrier has to deduct the money that they would be able to recover by selling the car as a salvaged vehicle. When this happens, you will still need to send the title to the carrier, but you will not sign it; therefore, you retain the car's ownership.

When the claim adjuster receives the vehicle title, the title will be stamped "salvage" and returned to you with the claim payment. You will then have the option to use the money you have been paid to try to get the vehicle fixed, or you can try to sell the vehicle on your own.

When a vehicle's title is stamped "salvage," the car is considered worth very little, even if its damages are repaired after the claim. This can make it difficult to obtain comprehensive coverage or collision coverage on the vehicle again, and hard to sell to someone else, because it is worth less than the same car without a salvage history. If you are in Texas, our pages on salvage titles and branded title insurance explain what coverage is still available.

Keeping your totaled car is often called buying it back, and it works the way described above: instead of handing over the title, you keep the car and the insurance company pays you less, because it cannot sell the car for salvage. In practice:

Buying back a totaled car can work well for an older car you know and trust, or one with damage you can fix affordably. It usually makes less sense for a newer car you still owe money on.

If your car is totaled and you still owe money on it through a finance or leasing company, the loan balance must be paid back to the bank. This is why it is important to buy gap insurance on a vehicle when you first buy it if you owe money on it.

You can usually purchase gap insurance from the bank or your auto policy. Gap insurance will pay the difference between what the insurance company says the car is worth and what is still owed on the loan if the car is worth less than the remaining balance on your loan at the time of the claim.

If you do not have gap insurance, the insurance carrier will pay the financing or leasing company the actual cash value of the car, and you will be held responsible for paying the rest of what is owed to the bank out of your own pocket.

A total loss does not stop you from getting insured again. If the accident was your fault, it can affect your next rate the same way any at-fault claim can, and that is where comparing carriers helps most, because each one weighs claims differently.

If you are buying a newer car, ask about new car coverage and gap coverage at the same time, so a future total loss does not leave you paying off a car you no longer have. A-MAX can compare options for you online, by phone at 1-800-921-AMAX, or at an office.

Keep an eye on the value of your vehicle. Sites like Kelley Blue Book can be used to determine the actual cash value of your car. If the value of your car is more than what you owe on the loan or lease balance, you can safely remove the gap insurance from your auto insurance policy to avoid the additional premium you are paying for the gap insurance.

Also, if your auto insurance policy includes “new car replacement” coverage or “agreed value” coverage, you may not need to carry gap insurance. Check how your own policy defines them first.

These coverages are designed to pay to replace your vehicle (new car replacement) with one of the same year, make, and model of your totaled vehicle or pay you a value that was determined for the vehicle when you purchased it (agreed value). Agreed value coverage will pay either the cost to repair the vehicle, even if it exceeds the actual cash value, or the agreed-upon value, regardless of depreciation.