Who Gets the Insurance Money When a Car is Totaled?

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Totaled car

If you’ve been in a car accident and your car is severely damaged, you might be wondering what happens next. Will your car be repaired or replaced? How much will you get from your insurance company? And who gets the insurance money when a car is totaled?

The answer to these questions depends on several factors, such as the extent of the damage, the value of the car, the type of insurance coverage, and the ownership of the car. In this article, we will explain what it means for a car to be totaled, how the insurance company determines the value of a totaled car, and who gets the insurance check when a car is totaled.

What is a Totaled Car?

A totaled car is a car that has been declared a total loss by the insurance company. This means that the cost of repairing the car exceeds its actual cash value (ACV), or the amount the car was worth before the accident. The ACV is based on factors such as the make, model, year, mileage, condition, and market value of the car.

The threshold for declaring a car totaled varies by state and by insurance company. Some states have a total loss formula (TLF) that compares the cost of repair plus the salvage value (the amount the car can be sold for parts) to the ACV. If the sum of the cost of repair and the salvage value is greater than or equal to the ACV, the car is considered totaled. Other states have a total loss threshold (TLT) that sets a percentage of the ACV as the limit for repairing the car. If the cost of repair exceeds the percentage of the ACV, the car is considered totaled.

For example, if a car has an ACV of $10,000 and a salvage value of $1,000, and the state has a TLF, the car will be totaled if the cost of repair is more than $9,000. If the state has a TLT of 75%, the car will be totaled if the cost of repair is more than $7,500.

How is the Value of a Totaled Car Determined?

If your car is totaled, the insurance company will pay you the ACV of the car, minus your deductible, if you have one. The deductible is the amount you agreed to pay out of pocket before the insurance company pays the rest of the claim. For example, if your car has an ACV of $10,000 and a deductible of $500, the insurance company will pay you $9,500.

The insurance company will use various sources and methods to determine the ACV of your car, such as:

  • The National Automobile Dealers Association (NADA) guide, which provides average prices for different makes and models of cars.
  • The Kelley Blue Book (KBB) guide, which provides estimated values for different makes and models of cars based on their condition, mileage, features, and location.
  • The local market, which reflects the supply and demand of similar cars in your area.
  • The condition of your car, which includes any pre-existing damage, wear and tear, modifications, or upgrades.
  • The salvage value of your car, which is the amount the insurance company can get from selling your car to a salvage yard.

The insurance company will also inspect your car and review any documentation you have, such as receipts, invoices, or photos, to verify the value of your car. You can also provide your own evidence or appraisal to support your claim, if you disagree with the insurance company’s valuation.

Who Gets the Insurance Check When a Car is Totaled?

The answer to this question depends on who owns the car and who is responsible for the accident. There are three possible scenarios:

1. You own the car and you are at fault. If you own the car outright and you caused the accident, the insurance company will pay you the ACV of the car, minus your deductible, if you have collision coverage in your car insurance quote. Collision coverage is an optional type of insurance that pays for the damage to your car caused by a collision with another vehicle or object, regardless of who is at fault. If you don’t have collision coverage, you will have to pay for the damage to your car out of your own pocket.

2. You own the car and you are not at fault. If you own the car outright and you are not at fault for the accident, the insurance company of the other driver will pay you the ACV of the car, minus your deductible, if you have one. You can also file a claim with your own insurance company, if you have collision coverage like I mentioned above, and they will pay you the ACV of the car, minus your deductible, and then seek reimbursement from the other driver’s insurance company. This is called subrogation.

3. You don’t own the car and you are at fault or not at fault. If you don’t own the car outright and you have a loan or a lease on it, the insurance company will pay the ACV of the car to the lender or the leasing company first, and then pay you any remaining amount, if there is any. This is because the lender or the leasing company has a lien on the car, which means they have a legal right to the car until you pay off the loan or the lease. However, if the ACV of the car is less than the amount you owe on the loan or the lease, you will have to pay the difference out of your own pocket. This is called being upside down or underwater on your car. To avoid this situation, you can buy gap insurance, which is an optional type of insurance that pays the difference between the ACV of the car and the amount you owe on the loan or the lease, if the car is totaled.

Conclusion

If your car is totaled, you may be wondering who gets the insurance money and how much you will get. The answer depends on several factors, such as the extent of the damage, the value of the car, the type of insurance coverage, and the ownership of the car. You should check your insurance policy and your state laws to understand your rights and obligations, and consult with your insurance company or agent to get the best possible outcome.


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