What Happens When a Vehicle Is Declared a Total Loss?

In the auto insurance industry, a car is deemed a total loss, or "totaled," if the insurer's cost to repair the damage and outfit you with a rental car exceeds the cost of giving you a check for a replacement vehicle. At this point, you must decide if you want to take the insurer's check for a replacement, use the claim money to repair the damages or dispute the claim of total loss with an arbitrator.

After an accident, a vehicle's total loss declaration will depend on the insurer. Some companies will "total" a vehicle if the cost to repair it is as low as 51 percent of the vehicle's actual cash value (ACV), while other companies wait until this percentage is over 80 percent. The totaled car may still be operable, but if the ACV is already low, as in the case with older model cars, the insurer may prefer to pay for low-cost replacement.

If you disagree with the vehicle total loss declaration and your insurance policy has an appraisal provision, you may hire an outside arbitrator to examine the vehicle and estimate the cost of repair. This may be your best bet if your vehicle has sentimental value, or if you think the insurer's claim check for a replacement vehicle is too low. You can look up your vehicle's ACV at any online blue book calculator.

Once a car is deemed a total loss, the more common option is to take the insurer's settlement claim check to replace the lost vehicle. Your settlement check will include the registration, tax and titling costs for a similar-value vehicle. If the check is enough to purchase the car you need, this may be your best option. In cases of a vehicle loss due to a traumatic accident, a new car may give you peace of mind.

If you have a good relationship with your local garage or can fix the vehicle yourself, consider using the settlement check to repair your totaled vehicle. This is your best option if you disagree with the total loss declaration but do not want to fight the insurer to reverse the loss designation. Keep in mind that will greatly diminish the value of your vehicle in the eyes of the insurer, but you will be able to retain your vehicle, especially if you disagreed with the loss in the first place.