What to Do When Your Car Is Totaled

So you’ve been in an accident, and your insurance company has declared your car a total loss. Does that mean your car is gone for good? Not necessarily. Even if your car has been declared totaled, you still have options. But it’s important to understand the process from the beginning; otherwise you may miss your chance to get the outcome you want.

Why Was My Car Declared Totaled?

It is not always apparent when a car might be declared totaled. Insurance companies choose this option when the cost of repairs exceeds the cash value of a vehicle, as in the case of many older cars. A newer car, though more extensively damaged, might not be declared totaled, because it still has significant monetary value.

What Happens to My Car?

Typically, when a car is declared totaled, the insurance company issues you a check for the cash value of the car, minus your deductible. The car is then sent to a salvage yard, where it may be auctioned off for parts. The insurance company receives the money from the auction. However, you can often choose to keep the car. In this case, the insurance company still issues you a check for the value of the car, minus what the car would have received at auction, and the vehicle is returned to you. You are responsible for the cost of repairs. However, in some cases this is not practical; for example, some states require owners to buy a salvage title or have the car inspected after it’s been repaired. And in some cases, if your car is a newer model and could bring in a significant amount of money at auction, the insurance company may refuse to let you keep it.

What If I Want to Keep My Totaled Car?

Decide early on if you want to keep your car. If you let the insurance company take it, and then decide you want it, it will be tough to retrieve it. If you change your mind too late in the process, you’ll have to buy it back at auction, and even then could be too late. In many states, you have to have a special license for auto salvagers or dealers just to be admitted into the auction.

If you decide to keep the car, make sure you have the money to make all the repairs. Some insurers won’t cover a totaled car unless it passes a department of motor vehicles inspection. If it does pass inspection, you should have no problem obtaining liability insurance; you may not be granted more coverage than that on an already totaled car, however.

What if I’m Not Happy with the Settlement?

If you decide not to keep the car, your insurer will give you a cash settlement. However, the amount may not be enough to buy a similar car. Several factors determine the value of your car, including the miles driven, special features, and local market value. If you feel the settlement is unfair, you can hire an independent appraiser, at your own expense, to assess the car’s value (make sure you get the appraisal in writing.) The insurance company may increase the settlement, and if it doesn’t, you could take the company to court, or hire an arbitrator to determine the case. However, hiring an independent appraiser and taking the case to court are both expensive, and you may end up losing money.