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How Much Do Insurance Companies Pay For A Totaled Car?

It may be one of your worst fears, but it can happen.  You are driving on the freeway or another busy roadway and you are in an accident.  Your car is totaled. The good news is that you have insurance. Now the question becomes how much is your car insurance company going to pay out for your totaled vehicle.  If your car is totaled, your auto insurance company will pay up to the Actual Cash Value of your vehicle. The Actual Cash Value of your vehicle is determined by your claims adjuster.

What Is A Totaled Car?

According to Kelley Blue Book, a totaled car is one that cannot be repaired legally due to the nature and extent of the damages or one that cannot be repaired safely and/ or cost-effectively.  Even if your car can be repaired safely, if the cost of the repairs exceeds the value of the car, your car insurance company will probably still declare your vehicle to be a total loss.  Under the laws of some states, your auto insurance company must inform the state if your car is deemed to be a total loss.

>>MORE: How To Get A New Car After A Total Loss Accident?

How Much Will Your Insurance Company Pay For Your Totaled Car?

If your car is totaled, your auto insurance company will pay up to the Actual Cash Value (ACV) of the car so long as you have the proper car insurance limits to mandate this payment.  The insurance company pays the ACV or your collision or comprehensive coverage limit, whichever is lower. To determine the ACV of your vehicle, your claims adjuster will take into account the year, make, and model of your vehicle, your odometer reading, the condition your car was in before it was totaled, and equipment that you have added to the vehicle that adds value to it.  The adjuster will then find similar vehicles that are being sold in your area to find out how much these vehicles are selling for. From this figure, the claims adjuster will estimate the ACV of your totaled vehicle. 

The ACV is typically the maximum payout you will receive unless you financed your vehicle and purchased gap insurance.  If you have gap insurance, your insurance company will pay your lender both the ACV and the difference between the ACV and the amount that you owe on your auto loan if you owe more on your auto loan than the vehicle is worth.  This keeps you from having to pay your lender out of pocket the difference between the value of the car and the balance of your loan after your car is no longer drivable. Thus, it is a wise decision to get gap insurance for a vehicle that you finance to protect you in the event that your car is a total loss.

>>MORE: How Much Will My Insurance Go Up After An Accident?

Additional Costs Car Insurance Companies May Pay

In some states, your car insurance company will allow you to collect the cost of your sales tax, title, and registration.  These states include Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Kansas, Kentucky, Maine, Maryland, Minnesota, Mississippi, Nebraska, Nevada, New Jersey, New  York, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia and Wisconsin. In states in which the car insurance company is not required to cover these payments, you can always ask your claims adjuster if it can be included.

>>MORE: Why Did My Car Insurance Go Up?

What If Your Car is New?

If you buy a new car and you do not want to have to worry about how much your auto insurance company is going to pay out and whether it will cover the cost of a new car, you can look into New Car Replacement Coverage or Guaranteed Replacement Coverage.  Most large auto insurance companies will replace a very new car if it is totaled even if you do not obtain New Car Replacement Coverage; however, it is a good idea to ask your insurance agent to be sure. Many auto insurance companies offer either New Car Replacement or Guaranteed Replacement for an additional fee. 

>>MORE: What You Need to Know About Buying Insurance for Your New Car

Which Insurance Companies Offer New Car Replacement?

  • Liberty Mutual offers new car replacement coverage for vehicles that are less than a year old and have less than 15,000 miles on them.  
  • Travelers Premier New Car Replacement will replace your new car with one of the same make and model if it is totaled and you have had your vehicle for less than five years. 
  • AllState offers new car replacement for vehicles that are two model years old or newer.
  • American Family will replace your new vehicle if you have had it for less than a year and it is totaled. 
  • Farmers offers new car replacement for vehicles that are less than 2 years old or have less than 24,000 miles.
  • Many other large insurance companies offer this coverage. Be sure to check with your car insurance company to see if it offers this coverage.

The good news is that new car replacement generally does not cost that much.  In fact, if you are paying $100 a month for your auto insurance coverage, you can get new car replacement coverage for as low as an additional $5 a month.

>>MORE: What Is Accident Forgiveness, Should You Get It and Who Offers It?

Final Thoughts

If your vehicle is totaled, your car insurance company will pay up to the Actual Cash Value (ACV) of your vehicle so long as you have enough insurance.  The ACV is determined by the amount that similar vehicles in your area sell for. This determination is made by your insurance adjuster and you can always present evidence that your vehicle is worth more if you disagree with the valuation.  In some states, your auto insurance company will also pay for the cost of sales tax, title and registration. Even in states that do not cover these payments, you can see if your insurance adjuster will include them. Finally, if you have Gap or Loan/ lease insurance, your insurance company will pay your lender the difference between the ACV of your vehicle and your loan balance.

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