How Does an Insurance Company Determine If a Car Is Totaled?


With an insurance company, nearly all decisions are made based on financial numbers. The company will react to a situation based on whether or not it makes financial sense. This is not always the case as a homeowners policy will pay to replace a home even if it is burned to the ground. But when it comes to an auto being totaled, you can expect your insurance company to pull out its car value book and its calculator to make a decision.

When Is A Car Totaled?

In general, an insurance company will total a car when the cost of repairs exceeds 70 to 75 percent of the car’s value. For example, if a car has sustained $8,000.00 in damage and it is considered to be worth $10,000.00, then most insurance companies would declare the car to be totaled.

What Happens To A Totaled Car?

After your insurance company has determined that your car is totaled, it will start working with you to develop a fair settlement price. In most cases, your insurance company will agree to pay you the value of the vehicle before it was wrecked. It would be difficult to get any more than that from your insurance company.

Once you and the insurance company work out a settlement, the insurance company will follow state laws to change the title of your vehicle and then salvage what it can from the vehicle. If there is a lien on the vehicle, then the insurance company will pay the lien using the settlement money. Whatever is left after paying the lien is given to the car owner. If the settlement money does not satisfy the lien, then the car owner has to pay the difference and they get no check from the insurance company.

When Being Totaled Is Most Common

The most common types of vehicles that get totaled are older vehicles that have values around or below $1,000.00. In some cases, the value of a vehicle is less than the insurance policy deductible. In these cases, the car is usually totaled immediately.

When you get into an accident with your vehicle, your insurance company has a lot of decisions to make. The first decision is to decide whether or not the car is worth repairing. If the car does not meet the financial criteria for repairs, then the insurance company will total the vehicle and negotiate a final pay-off with you.