What Does It Mean When Insurance Totals Your Car?

Totaled vehicles cannot be repaired in a cost-effective or safe manner.

An insurance company will classify a vehicle as being "a total loss" when the vehicle has suffered extreme damage that cannot be repaired in a cost-effective or safe manner. Vehicles that are totaled are considered to be beyond repair.

The Definition of 'Totaled'

A totaled vehicle can be defined as one that would cost more to repair than it is worth, one that cannot be repaired back to safe-driving standards or one that has sustained a drastic amount of damage that state law dictates the vehicle must be labeled as a total loss.

Actual Cash Value

A totaled vehicle is valued by estimating the actual cash value of the vehicle. calculator image by araraadt from Fotolia.com

Most insurance companies rate the value of the totaled vehicle by estimating the replacement amount of the vehicle minus any depreciation that has occurred on the vehicle since its original purchase. This value is called the actual cash value of the vehicle.

Policy Differences

It is important to understand that insurance policies vary; therefore, you should understand the contractual agreement related to your insurance policy. Some insurance policies allow for a reimbursement check, consisting of the actual cash value minus applicable deductibles, to be provided to the policy holder while other insurance policies require the policy holder to take responsibility for paying off remaining balances of unpaid loans on the vehicle.

References

• CarInsurance.com: What happens when my car is totaled in an accident?
• GoInsuranceRates.com: Total Loss Series: What Does it Mean When Your Vehicle is Totaled?
• Insurance.com: Understanding Your Options for a Totaled Car