What Happens When an Insurance Company Totals Your Vehicle?

If the cost to repair damage to your vehicle exceeds its value, your insurer might declare the vehicle a total loss. You will receive a payment based either on its pre-accident value as determined by an insurance adjuster or on the amount that the adjuster identifies as necessary to replace it.

Procedures

The insurance company will issue you a check for the monetary value of your vehicle prior to the accident, assuming the collision coverage stipulated in your insurance policy is sufficient. If your car is financed, the balance owed will be paid to the lender and you will receive the remainder of the payoff. You may purchase gap insurance to cover the difference between the amount your collision coverage pays and the balance owed on the vehicle.

Possession of Vehicle

The insurance company will try to recover as much value from the vehicle as possible to offset its losses on the claim. Depending on the severity of the damage, the company may choose to have the vehicle repaired and resell it at auction. If the vehicle cannot be salvaged, it may be sold to a junkyard to be used for parts.

Repurchase

If you prefer to keep your car, you may have the option to repurchase it from the insurance company after settlement of the claim. You will be required to pay the amount the insurance company estimates it would have received at the salvage auction from the sale of the vehicle. Check the law in your state, as this is illegal in some states. If it is permitted, state law may require the vehicle's title to be changed to "salvage" or "rebuilt" to make its history clear to future buyers. Make sure you will be able to insure the car before committing to a repurchase.

Amount

Some insurers base their determination of a vehicle's value on the current market value of the vehicle from Kelley Blue Book or another trusted source. If so, the insurer will adjust the base market value for any damage or wear and tear on the car. Other insurers contact automobile dealers in the area where the vehicle was garaged and ask what they would expect to receive for the sale of a similar vehicle. The amount of your stipulated deductible will be subtracted from the amount of the payoff to you.

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