How Much Will My Insurer Pay for My Totaled Car?

Last Updated on August 8, 2019

Having a vehicle deemed as a “total loss” by the insurance company often misleads consumers.

how much will i get for my totaled carOne might assume that they have insurance, so their car is totaled, and it will be paid off in full.

Unfortunately, this is rarely the case.

Right now, Americans are borrowing record amounts of money, and that includes car loans. So, it is likely that your vehicle will have a loan tied to it.

When your car is totaled, but you have a loan, you might find yourself in a sticky situation where you still owe on a vehicle that cannot be used at all.

Furthermore, you may find yourself in a debate over market values, because the insurer’s idea of market value is not the same as what you assume.

What Does it Mean When a Car is Totaled by Insurance?

Typically, three factors are assessed when determining if a car is a total loss, including:

  1. When the damage to the car is so severe that it could not be repaired safely;
  2. When the cost of repairs is worth more than the market value of the vehicle; and,
  3. When the damage is severe enough that it would be deemed by state regulations as a total loss.

Your insurer also has their criteria for what they consider as a total loss.

How Much Does Insurance Pay for a Total Loss Vehicle?

Bottom line: insurance companies only pay the market value.

That means the value of reselling or replacing your vehicle the day it was totaled based on make, model, year, and mileage. Basically, if you were to go out and buy a clone of your vehicle, the cost of that clone is what insurance is willing to pay – and not a penny more.

Insurers use a price comparison tool of vehicles in your area since costs do vary by state. After the claim’s adjuster finishes their research, they will propose the replacement compensation for your car.

Paying Off What You Owe

The insurance company pays what the market value of the car is, plus the costs involved with buying a car. That means that they pay market value plus sales tax, registration and upfront charges to buy a new vehicle of similar value.

If you agree with the total, your insurer will issue a check. If you have a loan, then they release the check to the bank – because the bank is technically the owner of your vehicle. If you own your car outright, then they issue a check to you for the balance.

What if I Owe More than Market Value?

Most people have cars that are worth less than they owe until they are over halfway through paying off that loan. Furthermore, if you purchase a new car, you can expect the deficit to be much larger. Unfortunately, the insurer does not care about how much you owe; they care about what the vehicle is worth.

If you still have a balance after insurance pays their market value, you must negotiate with the lender. Some lenders allow you to make payments, while others want the remainder paid within 30 to 90 days from settlement.

If you purchased a gap insurance policy when you bought your car, then the gap insurance would pay the remaining balance from what you owe and what the automobile insurer paid.

Can You Negotiate Vehicle Value?

Yes, you can.

The amount the adjuster offers is not set in stone. Instead, if you disagree with market values presented by the insurer, you can dispute the offer. However, it would help if you backed up your dispute with evidence. This includes getting market value assessments for vehicles in your area and not focusing on the retail value. Retail value is not the same as market value.

What if the Value of the Vehicle is More than the Loan?

In this case, you luck out. The insurance company issues a check for the amount left on the loan, and then they issue a check to you for the remaining balance. You can use that money as a down payment on a new vehicle.

Staying Ahead – Purchase Gap Coverage

A good rule of thumb is that if you are under halfway through your loan, you should carry gap insurance coverage and renew it until your car’s market value is now higher than your loan balance. For some buyers, this can be three years into a seven-year loan, while for others it can be four years into a five-year loan.

This is why many finance experts recommend buying a car in cash or putting enough down to cover the depreciation. When you are even or above what you owe, then you do not have to worry about fighting the insurance company or paying for a vehicle you still owe money on.

James Shaffer
James Shaffer James Shaffer is a writer for and a well-seasoned auto insurance industry veteran. He has a deep knowledge of insurance rules and regulations and is passionate about helping drivers save money on auto insurance. He is responsible for researching and writing about anything auto insurance-related. He holds a bachelor's degree from Bentley University and his work has been quoted by NBC News, CNN, and The Washington Post.
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