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Filing insurance claims can be stressful — especially for a totaled car. Furthermore, figuring out whether your car is totaled isn’t always clear.

If your insurance company determines that your car is totaled, it’ll generally pay you its fair market value, also called actual cash value, from just before the accident.[1] This isn’t necessarily what you paid for the car, how much it would cost to get a new car, or the remaining balance on your auto loan. Here’s how insurance payouts for totaled cars work.

What is a totaled car?

Contrary to popular belief, a totaled car isn’t just one that was heavily damaged in an accident. A totaled car is a vehicle that someone’s filed a claim for where the insurer determines that repairs would cost more than its value.[2]

Under this definition, your car doesn’t need to be in an accident at all to get totaled. It could be damaged in a major hailstorm or flash flood. The lower your car’s value, the easier it is for it to be totaled.

For example, if your car needs $5,000 of repair work, an insurer might pay that if your car is worth $40,000. But if your car’s value is only $4,000, an $8,000 repair is more than the car’s value, and the insurer may determine that it’s totaled.

How do insurers decide when a car is totaled?

If your car is damaged, you need to file a claim with the insurance company to see if it’s totaled or repairable. Here’s how the claims process generally works:

  1. File a claim with the insurance company. After an accident, file a claim with your insurance company or the other driver’s insurance company, depending on who’s at fault and if you have collision or comprehensive coverage.

  2. The insurer estimates the repair costs. The insurance company will send out a claims adjuster to inspect your car and calculate an estimate for auto body repair costs.

  3. The insurer decides whether your car is totaled or repairable. The insurance company compares the cost of the repairs against your car’s pre-damage value. If repair costs meet a certain threshold, it’ll declare your car a total loss.

  4. The insurer offers a cash settlement. If the insurer declares your car totaled, it’ll offer you a cash payout. You can review this settlement and decide whether it’s fair — and if not, you have options to negotiate.[3]

Insurance companies generally compare your car’s pre-damage cash value against the cost of the repairs it would need to make it whole again. In some states, they may also include other costs in the calculation, such as salvage costs.[4]

Most states set a minimum threshold for costs to be considered repairable or totaled.[4] For example, in Oklahoma, your car would need repair costs of 60% of your car’s cash value to be considered totaled.[5]

If you have a car worth $10,000 in Oklahoma, that means your car would be totaled if an insurance adjuster estimated it needed $6,000 of repairs. But in Colorado, where the threshold is 100%, you’d need a full $10,000 repair estimate for your car to be totaled.[6]

Total loss formula

In other states, insurers use the total loss formula, which requires a bit more calculation and work. The formula is:

  • FMV = your car’s fair market value before it was damaged

  • RV = cost of repairs to completely fix your car

  • SV = your car’s value as a salvage vehicle sold to a scrapyard

  • If RV ≥ FMV − SV, then the car is declared a total loss.[1]

In other words, if it costs more to fix your car than to just pay out what your car was worth (minus any proceeds it can get from selling your car to a scrapyard), your insurer will likely pay you the value. It’ll declare your car a total loss, sell it for parts, and pay you what it was worth rather than paying to fix it up.


For a $25,000 car that costs $15,000 to repair and is now worth $5,000 at the junkyard, your insurer might choose not to total your car and just pay for the repairs. The repairs ($15,000) will be less than what it’ll have to pay you minus the salvage value ($25,000 − $5,000 = $20,000).

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How much will my insurance pay for my totaled car?

If the insurance company declares your car is a total loss, it’ll pay you its fair market value, also known as its actual cash value, minus any deductible. In other words, the payout amount for your totaled car is what you would’ve been able to get if you’d sold it before it was damaged.[1]

For example, if your car’s fair market value was $25,000 just before it was damaged, that’s how much the insurance company would pay you for it if it’s totaled.

The fair market value isn’t how much you paid for the car, how much money you have left on your loan if you financed your car, or even how much it’ll cost you to buy a new, similar car. A lower fair market value can leave people who financed their vehicles in tough financial spots after an accident.

For example, if you recently paid $35,000 for a new car and still have $31,000 remaining on your loan — but insurance will only offer $25,000 after you pay a deductible if you have collision or comprehensive insurance — that means you still owe $6,000 for a car you no longer own. This is an especially common situation at the beginning of a car loan because a car’s value can depreciate very quickly.

See Also: 10 Best Car Insurance Companies

Insurance coverage that pays for a totaled car

Unfortunately, whether you can file a claim for a totaled car depends on the circumstances of how the damage happened and what type of insurance coverage is involved. Here are the four main types of insurance coverages that can be used to pay for a totaled car:

Coverage TypeWhose Insurance?When It Kicks In
Property damage liabilityOther driver’sIf someone hits your car
Uninsured/underinsured motorist property damageYoursIf someone hits your car, but they’re driving without insurance or not carrying enough coverage to pay for your totaled car; also applies in a hit-and-run accident
CollisionYoursIf you caused the damage while driving your car, such as hitting another vehicle or a tree; a deductible applies
ComprehensiveYoursIf you’re not driving your car and it’s damaged, such as from a flash flood or falling tree; a deductible applies

Can you keep a totaled car?

Generally, when your car is totaled, your insurance company will take possession of it so that it can sell it for scrap and recoup some of its cost. In some cases you might prefer to keep it, like if it has sentimental value or you’re handy with tools and want to rebuild it yourself.[7]

In that case, you’ll need to check with your state’s rules. For example, Illinois has restrictions on whether you’re allowed to keep your totaled car. If it’s allowed, you’ll need to let your insurance company know as soon as possible so it can subtract the salvage value from your payout amount, since it won’t be able to sell the car.

Can you trade a totaled car?

Now that you’re in need of a new car, you might be wondering if you can just trade in your busted old car to help defray the cost a bit.[1]

It’s worth reaching out to some local dealerships to see whether they accept totaled trade-ins first, because many do not. Even if one does, the amount you get might be much less than it’s actually worth (even as a junk car), and you may be better off accepting the cash settlement anyway.[1]

Fighting a total loss settlement

If the insurance company declares your car totaled and offers you a total loss settlement, it’s important to know that this isn’t a take-it-or-leave-it situation. If you don’t agree with the offer, you’re free to negotiate a counteroffer, but your chances of success may increase if you follow a few strategies:

  • Review your policy. Your policy, which is essentially a contract, will spell out any rights you have or don’t have for contesting any claims.

  • Gather evidence. If you invested money in your car, like recently buying new tires or expensive sound equipment, get the receipts to back you up and estimate your car’s value on your own using tools like Edmunds or Kelley Blue Book.

  • Get an independent appraisal. Another appraiser may be able to offer a higher estimate, particularly if you can show receipts for work you’ve done to your car.

  • Contact your state’s insurance commissioner. Every state has an office for consumer insurance, and it may be able to advise you on your state-specific rights.

  • Hire an attorney. If all else fails, an attorney may be able to help you get your car’s full value back.[8]

Totaled car FAQs

Here are some quick answers to some of the most common questions about how much insurance will pay for your totaled car.

  • If you’re still paying off your car, the insurance company generally sends the payout to your lender to pay off your loan, with any extra funds going to you. Sometimes, the cash settlement isn’t enough to cover your loan balance, and you’ll be in the unfortunate scenario of having to make car payments on a vehicle you no longer have.

    The only exception is if you purchased gap insurance (guaranteed asset protection), which is meant to cover the difference between your loan balance and the insurance payout.

  • Your car will be issued a salvage title after the insurance company declares it a total loss. This means that you’re no longer legally allowed to drive the car on the road and it can only be towed around and sold for scraps or parts.

    If you opt to keep and repair your totaled car on your own, some states allow you to get your rebuilt car inspected, and if it passes, it’ll be issued a new rebuilt salvage title that clears it for road travel again.

  • If you’re not at fault, you can file a claim with the other driver’s insurance in certain states. Alternatively, if the damage is no one’s fault and you purchased comprehensive insurance, you can file a claim with your own insurance company.

    If someone else caused the damage, your insurance company may pursue the other insurer for reimbursement. 

  • If your car is declared a total loss, insurers will offer you a payout equal to your car’s fair market value just before the accident damage.[1] If you opt to keep your car, however, it’ll subtract the salvage value from your payout.

    Some states allow you to repair and retitle a totaled car, but rebuilt car insurance is typically more costly for these cars, so their overall value will remain low.

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  1. Kelley Blue Book. "Totaled Car: Everything You Need to Know." Accessed January 19, 2023
  2. III. "Auto insurance jargon buster." Accessed January 19, 2023
  3. III. "Determining your car's value and cost of repair." Accessed January 23, 2023
  4. Nolo. "The Insurance Company Totaled My Car. What Now?." Accessed January 24, 2023
  5. Oklahoma Tax Division. "CHAPTER 60. MOTOR VEHICLES." Accessed January 24, 2023
  6. Colorado General Assembly. "Total Loss Brand Title Motor Vehicle." Accessed January 24, 2023
  7. FindLaw. "What Happens When Your Car is Totaled?." Accessed January 24, 2023
  8. III. "What should I do if I am having trouble settling my claim?." Accessed January 24, 2023
Lindsay VanSomeren
Lindsay VanSomeren

Lindsay VanSomeren is a freelance personal finance writer living in Suquamish, WA. Her work has appeared with FICO, Credit Karma, The Balance, and more. She enjoys helping people learn how to manage their money better so they can live the life they want.