When is Your Car Considered Totaled?

Much confusion exists about what it means to have a totaled car. Keep reading to find out when a car might be considered totaled and what options Caliber customers have if their cars are deemed a total loss.

What Does it Mean for a Car to be Totaled?

Basically, a car is totaled if it would cost more to fix it than the vehicle is worth. You don’t decide if the car is totaled, unfortunately. Neither do the mechanics or other professionals at Caliber. The decision-maker in this case is your insurance company.

When is a Car Considered Totaled?

In most cases, insurance companies look at a formula to determine whether a car is considered a total loss. The formula involves:

Actual cash value before the damage. This is the cash value of the car just before the damage occurs — not the amount you paid for the vehicle or what it might be worth to you. For example, if you purchased a car for $20,000 three years ago, it may only be worth $15,000 in the market now. Insurance companies consider sources like Kelly Blue Book and the National Automotive Dealers Association (NADA) guidebook in arriving at these values.
Salvage value. This is the value of your car in its damaged condition after the accident. Insurance companies may base this amount on market data, information it gathers based on salvage title prices, and the amount of damage to your vehicle.
Cost of repairs. This is the estimated cost to repair your vehicle. Insurance appraisers typically view your vehicle in person to make estimates about how much repair costs might be.

In general, if the salvage value plus the cost of repairs is more than the actual cash value before the damage, the car is deemed totaled. The formula for that looks like this:

Salvage value + cost of repairs < actual cash value before damage: Car is repaired.
Salvage value + cost of repairs > actual cash value before damage: Car is considered totaled.

Some states have slightly different rules when it comes to reaching the total loss threshold. For example:

If the salvage value plus cost of repairs is more than 75% of the actual cash value before damages, the vehicle may be considered totaled in Alabama, Kansas, Kentucky, Louisiana, Maryland, Michigan, Nebraska, New Hampshire, New York, North Carolina, North Dakota, South Carolina, Tennessee, Virginia, West Virginia and Wyoming.
States with a 70% total loss threshold include Arkansas, Indiana, Iowa, Minnesota and Wisconsin.
States with an 80% total loss threshold include Florida, Missouri and Oregon.
A few states have a threshold that’s even lower; Nevada’s is 65% and Oklahoma’s 60%.
All other states have a 100% total loss threshold (repairing cars as long as the total cost plus salvage value is equal to or less than actual value) or follow the simple formula above.

If the Airbags are Deployed, is the Car Considered a Total Loss?

No, deployed airbags don’t automatically mean a car is totaled. However, airbags can be expensive to replace. Because of this, the cost they add to repairs can often bring the amount up high enough that the car is considered totalled.

Consumer Affairs notes that the average cost to replace airbags after a significant motor vehicle crash runs $3,000 to $5,000. Obviously, the actual totals can range widely depending on the type of vehicle and the severity of the accident. In some cases, for example, not all airbags deploy and you may only have to replace one.

If you do have to replace multiple airbags, those costs are in addition to all the other repairs your vehicle might need. Adding thousands to the mix makes it more likely totals will rise above the threshold.

Is a Car Automatically Totaled in a Front-End Collision?

It may seem like cars are more likely to be totaled when they sustain front-end damage, however that is not always the case. This depends on the total costs of the repairs and how that relates to the value of the car prior to the damage.

Many cars have expensive parts, such as the engine, cooling systems and sensors in the front, and a direct hit in that area can cause more expensive damage than a side or rear hit. Consumer Affairs puts the average cost of replacing a car’s engine at around $4,000 at the lowest, for example.

What Factors Make it Most Likely a Car Might be Deemed Totaled by an Insurance Company?

While every case is unique, some situations are more likely to lead to a totaled car. They include:

Your car is over 8 years old. Older cars typically have less market value, so it doesn’t take as much damage to total them.
The vehicle’s frame (or underlying structure) is damaged. While no specific type of damage automatically ensures a car is totaled, frame damage makes a total loss much more likely. That’s because frames can be very expensive to replace or repair — the average range is $600 to $10,000. If there is extensive damage to the frame, it’s often not worth fixing.
Your car has high mileage. Even if your car isn’t that old, if you have racked up a lot of miles, its value may be lower than other similar cars. That increases the chances that repair costs plus salvage value are more than the actual value of the vehicle.
Your car won’t start or isn’t operable after the accident. While this doesn’t mean your car is totaled, it might indicate that there is serious (and expensive) damage to the vehicle that could increase the chances of it being deemed a total loss.

What Happens After Your Car is Deemed a Total Loss?

If your insurance company applies the above formulas and decides your car is totaled, it won’t pay to repair it. Instead, it will issue you a payment for the actual value of the car prior to the damage — minus any deductible you may have.

Consider the example scenario below to understand how this might look in real life:

Your car is worth $10,000.
The salvage value plus cost to repair it after an accident is estimated at $12,000, so the insurance company deems it totaled.
Your deductible is $1,000.
The insurance company would issue payment of $9,000.

If you own your car outright, the payment is made to you. If you are still paying a lender for the car (which means there is a lien on it), the payment may be issued to you and the lender or direct to your lender. In this case, several situations can occur:

You owe less than the value. In this case, the loan is paid off and you get to keep the leftover amount.
You owe the exact value. The loan is paid off.
You owe more than the value. The entire insurance payment goes to the lender and you still owe any leftover amount. This is known as being underwater or upside down on your car loan.

The length of time it takes to receive your payment can vary depending on the insurance company, the state where you live, and the complexity of your case. Typically, insurance companies have between 15 and 40 days, according to state laws, to investigate a claim and make a decision about a payout. Once that decision is reached, they have another 5 to 30 days on average to complete the payout. That can mean a total time of just over two months before you receive money for your loss.

Can You Keep a Car if it’s a Total Loss?

Yes, you may be able to keep your car after it’s totaled in an accident. Some reasons you might want to do so include:

The car is very sentimental to you and you want to keep it “in the family.”
You don’t agree with the insurance company that it’s a total loss and feel you can fix it and continue driving it safely.
You are a mechanic or have other connections, so you know you can get the car repaired for much less than the appraisal totals.

Note that state rules do apply, and you may not be able to keep a car that’s been totaled in every state. Check with your insurance company if you aren’t sure.

Work with Caliber Collision

If your car was damaged in an accident, Caliber Collision can help you get back on the road safely. Our collision services can help whether you were in a minor fender bender or a major accident that bordered on (or even crossed) the line of totaling your car.

Additional Sources:

Consumer Affairs. https://www.consumeraffairs.com/automotive/how-much-does-it-cost-to-replace-an-airbag.html#
Consumer Affairs. https://www.consumeraffairs.com/automotive/how-much-does-it-cost-to-replace-an-engine.html
Ask Jerry. https://getjerry.com/questions/how-much-does-it-cost-to-fix-a-car-frame
Policy Genius. https://www.policygenius.com/auto-insurance/how-long-does-a-car-insurance-claim-take-to-settle/

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