A totaled car is a vehicle that cannot be repaired legally, safely or cost-effectively. The term is derived from insurance company terminology that describes damage that cannot be reasonably fixed and forces the insurance company to declare your car a total loss. However, even if the vehicle is declared a total loss, you do not have to relinquish the car to your insurance company. Some car owners decide to repair their cars for emotional or financial reasons.
Your car insurance agent will decide if your car is a total loss according the company's guidelines. You or your insurance company is also responsible for notifying the state if your car is totaled, depending on your state's laws.
There are three reasons a car may be considered a total loss. If it cannot be repaired safely, insurance companies always declare it a total loss. If a car requires repairs that cost more than its assessed value, your insurance company will also call it a total loss. State law may also require the car insurance company to declare your car a total loss due to the type or extent of the damage.
The sale price of comparable cars in your area determines the assessed value of your car, which is called the Actual Cash Value (ACV) of the car. The car's condition, mileage and optional upgrades also affect its value, so it's important to give your insurance company as much accurate information about your car as possible.
Totaled cars may still be valuable enough to warrant repair. If you would like to keep your car, there are ways to retain ownership and still receive a settlement check.
Insurance companies usually sell damaged cars to a salvage yard for parts or repair. If you would like to be responsible for repairing the car yourself, you can request to purchase the car back from your insurance company. Your insurance company will solicit bids for your totaled car from local salvage yards to set a fair price. If you are willing to pay that price, the insurance company will deduct the cost of the totaled car from your settlement check and return the car to you.
If the damage is too great, state laws may not allow the insurance company to sell the totaled car back to you. These laws will also restrict how you can use the totaled car. Most states refuse to issue license plates for a totaled car until it is completely repaired, can pass state inspection, and meets the requirements to apply for a new title. Depending on your state's laws and the extent of the car's damage, the title may also be changed to a salvage title. Additionally, you'll be required to carry insurance on the salvaged car, such as collision coverage, that meets your state's requirements for insurance. It is unusual to be able to obtain full coverage on a salvaged car.
The laws that govern car insurance companies and totaled cars vary between states, so it's important to consult with your state's Department of Motor Vehicles (DMV) before committing to repairing your car. Some car insurance companies also refuse to insure any car declared a total loss -- be sure to call your insurance agent to verify they'll insure a totaled car.