What Happens If Your Car Is Totaled?

If you’ve been in an accident and your car takes a serious beating, it will probably be considered “totaled” by your insurance company. But what does this mean for you and what do you do about it?

Here’s a quick breakdown of what to do if your car is totaled — so you can get back on the road and keep your dreams moving forward.

How Is the Value of My Car Decided?

You might take one look at your car and figure you won’t be getting behind its wheel anytime soon, but American Family will actually decide whether your car is considered totaled. There are a number of factors we’ll look at to determine if your vehicle is a total loss or if it can be repaired.

Actual cash value. We’ll set you up with a claims adjuster who will calculate your car’s actual cash value (ACV). To do this, the claims adjuster evaluates your vehicles condition, and produces an estimate of its worth based on the make, model, year, mileage and vehicle options.

Salvage value. The resale value of the parts and the metal, or “salvage value,” is calculated.

Cost of repair. We’ll estimate the cost of repairing your vehicle.

If the vehicle’s cost of repair plus the salvage value is more than the actual cash value of the vehicle, it’ll typically be declared a total loss.

What Happens After My Car Is Declared Totaled?

So, you find out your vehicle is a total loss — now what? Well, your claims adjuster will probably ask you for any keys to the vehicle, and will have you remove all personal items in it. You’ll also need to connect with your finance or leasing company to let them know American Family Insurance will be contacting them.

Once that’s over, you’ll receive a cash settlement, which is a check in the amount of the actual cash value on your vehicle. If you leased the vehicle, the payment goes directly to the leasing company, and if you financed the car, the bank or finance company will receive the payment for what you still owe, and the remainder will be given to you. Of course, if you own your vehicle free and clear, you’ll get the full amount and can use it to purchase a replacement vehicle.

What Happens to My Car?

Usually, we’ll take ownership of your vehicle by transferring the title to our name. After that, we’d likely sell it to a salvage buyer.

If you decide to keep your car, which you’ll work out with us, the salvage value will be deducted from your settlement total. Some states have specific guidelines relating to owner retained total losses, so be sure to check with your claims adjuster to fully understand what this entails.

Do I Have To Pay Off the Loan On My Totaled Car?

Okay, you’ve accepted that your car is a total loss. But what if there’s still a loan on the vehicle? Are you responsible for paying the balance?

Usually with a total loss, American Family, or the at-fault driver’s insurance company, will cut a check for your car’s actual cash value, as mentioned before. If you’re financing your vehicle, the insurance company will pay that amount to the lender, and if there is any remaining money, it’ll be paid out to you. So, the short answer is that, as long as your car is insured, you or your lender will be reimbursed for its actual cash value if it’s been totaled. This reimbursement is used to pay off the loan.

Auto Lease/Loan Assistance Gap Coverage

Keep in mind, there is such a thing as still owing money to your lender after you receive payment from the insurance company. Why? Because the insurer is only obligated to pay you for the fair market value of your car, and sometimes when you’re financing a car, you’ll owe more money on it than it’s actually worth. This is called being “upside down” and it’s a great reason why you should have auto lease/loan gap coverage.

Lease/loan gap coverage is an additional auto coverage you can add to your policy, so in the event you’re “upside down” when your car is totaled, it’ll pay for the “gap” between what your car is worth and what you still owe to your lender.

Having a totaled car isn’t a fun situation to deal with, but knowing what comes next can help reduce some of the stress. Connect with your American Family Insurance agent to find out just the right auto insurance coverages to protect you from the unexpected.


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