How to Total a Car without Financially Getting Hurt?

How to Total a Car without Financially Getting Hurt?

Theoretically, it is not possible to total a car without getting hurt financially. If your car is totaled in a covered accident then the insurance company will pay for your totaled car. However, if the accident is not covered by the insurance policy then you won’t be able to file a claim!

Key Takeaways

  • Whether a car is a total car or not can only be decided by the car insurance company
  • In the USA, car insurance providers use either Total Loss Threshold (TLT) or Total Loss Formula (TLF) to decide whether a car is totaled or not  
  • When you file a car insurance claim, the company appoints an Insurance adjuster to determine whether a car is totaled 
  • It is the best decision to tow your car from an approved body shop by your car insurance provider
  • A “Gap Insurance” can save you from financially getting hurt by a totaled car

What Is a Totaled Car?

If your car is damaged because of an accident or other reason and if it requires more money than the car value to fix/repair then the car will be considered as a totaled car. Let’s assume you have a car worth $5,000 and due to a recent accident, you have to repair the car. However, the repair cost is about $6,500. So, in this situation, your car will be considered as a Totaled car. In this type of situation, it is difficult to file an insurance claim because in most cases the insurance company will declare the car a total loss and won’t accept the claim.

What is a Total Loss?

According to Wikipedia:

“In insurance claims, a total loss or write-off is a situation where the lost value, repair cost, or salvage cost of a damaged property exceeds its insured value, and simply replacing the old property with a new equivalent is more cost-effective. Such a loss may be an “actual total loss” or a “constructive total loss.”

If your car is damaged beyond reasonable repair then the insurance company will declare it a Total Loss. When your car requires repair, the insurance company will assign a claims adjuster to determine whether your vehicle is damaged beyond reasonable repair. The claims adjuster will check the vehicle and other variables to determine the repair cost. Then the insurance company will check the report and see whether the repair cost is more than the car value or not. If the repair value is more than the car value then the insurance company will consider the car a totaled car and will declare a Total Loss. On the other hand, if the total cost is below the value of the car then the insurance provider will accept the insurance claim.      

How does an Insurance Company determine whether a Car is a Total Loss or Not?

Usually, there are two methods available that almost every insurance company uses to determine whether a car is a total loss or not. They are –

  • Total Loss Threshold: TLT or Total Loss Threshold refers to a certain percentage that makes an insurance company declare that a car is a total loss. Usually, when a car’s total repair cost reaches a certain percentage of the car’s total value, which is the total loss threshold. TLT is not fixed and depending on the state where you live, your Total Loss Threshold will vary. So, you should contact your insurance provider to know the exact Total Loss Threshold.     
  • Total Loss Formula (TLF): This is a type of formula that many car insurance companies use to determine whether a car is a total loss or not. This formula uses total repair cost, salvage value, and ACV to calculate the TLF. So, if your vehicle touch or exceed the TLF figure then the insurance company will declare your vehicle a total loss.

How USA Sates Determine whether a Car is Total Loss or Not

Different states of the USA use different formulas to determine whether a car is a total loss or not. The below table will give you a clear idea!

Name of the StateName of the Method
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
Washington, D.C.
West Virginia
Wisconsin
Wyoming
(Total Loss Threshold) 75%
(Total Loss Formula) TLF
(Total Loss Formula) TLF
(Total Loss Threshold) 70%
(Total Loss Formula) TLF
(Total Loss Threshold) 100%
(Total Loss Formula) TLF
(Total Loss Formula) TLF
(Total Loss Threshold) 80%
(Total Loss Formula) TLF
(Total Loss Formula) TLF
(Total Loss Formula) TLF
(Total Loss Formula) TLF
(Total Loss Threshold) 70%
(Total Loss Threshold) 70%
(Total Loss Threshold) 75%
(Total Loss Threshold) 75%
(Total Loss Threshold) 75%
(Total Loss Formula) TLF
(Total Loss Threshold) 75%
(Total Loss Formula) TLF
(Total Loss Threshold) 75%
(Total Loss Threshold) 70%
(Total Loss Formula) TLF
(Total Loss Threshold) 80%
(Total Loss Formula) TLF
(Total Loss Threshold) 75%
(Total Loss Threshold) 65%
(Total Loss Threshold) 75%
(Total Loss Formula) TLF
(Total Loss Formula) TLF
(Total Loss Threshold) 75%
(Total Loss Threshold) 75%
(Total Loss Threshold) 75%
(Total Loss Formula) TLF
(Total Loss Threshold) 60%
(Total Loss Threshold) 80%
(Total Loss Formula) TLF
(Total Loss Formula) TLF
(Total Loss Threshold) 75%
(Total Loss Formula) TLF
(Total Loss Threshold) 75%
(Total Loss Threshold) 100%
(Total Loss Formula) TLF
(Total Loss Formula) TLF
(Total Loss Threshold) 75%
(Total Loss Formula) TLF
(Total Loss Threshold) 75%
(Total Loss Threshold) 75%
(Total Loss Threshold) 70%
(Total Loss Threshold) 75%

What Happens When a Car is Totaled?

If your car insurance provider of yours declares your car a total loss then there are a few steps that you can take. For example, you can file an insurance claim under the appropriate type of coverage. This way you will be able to receive reimbursement for your “car’s value” minus “any deductibles.” There are quite a few types of coverage to choose from –

  • If the cause of the totaled car is an “at-fault accident” then you can pick “Collision” coverage
  • If the cause of the totaled car is a “not-at-fault accident” then you can pick “At-fault driver’s liability” insurance coverage
  • If the cause of the totaled car is a “weather-related event or vandalism” then you can pick “Comprehensive” insurance coverage

You can also choose from “gap insurance” and “new car replacement.” If you have a leased or financed car and if it gets totaled then Gap Insurance will be the best option. The best part of gap insurance is, that it will provide coverage for the difference between the car’s ACV and the amount you owe on your loan. You can buy gap insurance from your current car insurance provider or any other car insurance provider. However, while buying gap insurance, you should keep in mind that gap insurance won’t provide coverage for expenses like –

What Happens When a Car is Totaled?
  • Car repair when the car isn’t totaled
  • Damage of property by your car
  • Medical expenses
  • Expenses of a rental car
  • Any carry-over balances

So, if your car is totaled and you have leased the car then the insurance company will pay the leasing company. Moreover, if you have an auto loan the insurance company will pay off the loan and then pay you money. However, if you owe more than your car’s total value then you have to pay the lender the difference. Now, if you have gap insurance then you will be protected from these types of situations.

What Steps You should take if your Car is Totaled?

If your car is totaled then there are a few steps that you should take immediately to minimize the damages and your loss. Now, if your card is totaled then follow the below steps –

  • You should file an insurance claim as soon as possible. The insurance claim for total loss requires lots of time to process therefore you should immediately file an insurance claim.
  • You should tow your car from an approved body shop by your insurance provider. If you tow the car from the approved body shop then the shop will provide the insurance company the full assessment of your car’s condition and the total cost of the repair. The insurance company will use this report to decide whether to declare the car a total loss or not.
  • You should remain calm and collect all the required documents to file the claim. Any missing documents will delay the process therefore, you have to ensure that you have all the documents in hand while filling out the claim.
  • You should also calculate the car value by yourself to make sure that you’re getting the right decisions from the car insurance company. It will help you find out whether your car is really worth being totaled or not.
  • You should also check the current status of your loan. It will help you find out whether you owe on the lease or loan. After settling the insurance claim with the insurance company you will receive money from the insurance coverage.
What Steps You should take if your Car is Totaled?

FAQs about How to Total a Car without Financially Getting Hurt

What does it mean when your car is a total loss?

If the insurance company declares that your car is a total loss then it means, it will cost more money to repair your car than the current total value of the car. For example, if your car’s value is $10,000 but it requires $12,000 to repair your damaged car then it will be considered a total loss.

Is it worth keeping a totaled car?

No, it is not worth keeping a totaled car. This is because keeping a totaled car will cost you more money than the actual value of the car. Moreover, you will find it very difficult to get insurance coverage for your repaired totaled car.

What is the total loss threshold in Texas?

The total loss threshold in Texas is 100%. It means if the car’s total repair cost is 100% or more of the car’s ACV then the car will be declared as a totaled car.

What happens when you total a financed car?

If you total a financed car then two things can happen. If your car is insured then the insurance company will pay the rest of the loan payments until your loan is paid off. On the other hand, if your car is not insured then you have to make all the remaining payments of the loan amount!  

References:

https://www.alllaw.com/articles/nolo/topics/what-happens-when-you-total-a-financed-car.html

https://www.bankrate.com/insurance/car/total-loss-car-insurance/

Last Updated on December 25, 2023 by Magalie D.

Scroll to Top