My Car Was Just Totaled. What Do I Do?
What you need to know about insurance, financing, and more.
Originally published on January 19, 2018
“My car was just totaled: What do I do?”
Assuming you’re not seriously hurt, the aftermath of a traffic accident can be just as traumatic as the collision itself. In addition to the stress and uncertainty that abounds when you lose your car, there are numerous questions that arise. Chances are, you’ve never had to think through the answers (and hopefully you never will again!).
It helps to know what to expect and what you need to do if your car is totaled.
Your Car Isn’t Technically Totaled Until The Insurance Company Says So
A quick note on the word “totaled,” which refers to the term “total loss.” If your insurance company declares your car a total loss, it typically means the cost to fix it is more than half of what the car is worth. At that point, the insurance company usually cuts a check, buys the car, and sells it for whatever it can get. The vehicle then becomes a “salvage title” vehicle.
In other words, no matter how badly it’s damaged, your car isn’t technically totaled until after the insurance company says so.
Once Your Vehicle Is Declared a Total Loss, The Paperwork Begins
It’s important to know that you can’t use the insurance check for repairs, since the insurance company is buying the car. That also means the insurance company will likely need some important documents from you:
- The title, if you own the car outright.
- Your lender’s contact information, if you still owe money on a loan or there’s a lien on your title. That’s because the insurance company will work with your lender to reach a settlement on next steps. (If you’re financing through Capital One, for example, the insurance company should call
Capital One's Auto Finance Center.)
- A power of attorney form (but not always). This has to do with enabling the companies to file relevant paperwork, including transferring the title, on your behalf.
You Still Need to Make Your Car Payments, Even If It’s Totaled
With most lenders, you owe the remainder of your loan once your car is declared a total loss. While the insurance check goes toward the balance, it's based on what the car is worth (or in insurance speak, your car's Actual Cash Value, or ACV), rather than what you owe. In other words, if you’re upside down on your car, meaning you owe more than it’s worth, you could end up making payments on a car you no longer have.
This is Where “GAP Insurance” Comes Into Play
GAP (Guaranteed Asset Protection) products are designed to account for all or part of the difference between the amount you owe and your car’s value. If you have GAP, you’ll need to send in even more documents, including the insurance evaluation report and settlement breakdown, police report (if applicable), and declaration page, among others. Your lender may also send over some relevant documents, including your payment history.
If You Bought an Extended Warranty, You Might Get Money Back
New vehicles come with a warranty, and that won’t entitle you to money. However, if you bought a used or Certified Pre-Owned vehicle and opted to buy an extended warranty or service contract, you may be entitled to a partial refund...and if you still owe money on your vehicle, your lender is entitled to apply that refund toward your balance. Reach out to the company that sold it to you (or call the dealership if you bought it at the same time you got your car).
If You Want To Keep Your Totaled Car...
Through a process called “retaining salvage”, you can keep your car even if it’s declared a total loss, but it’s a tricky process that comes with a lot of caveats:
- Your insurance company will likely reduce the settlement amount by whatever your car is worth in its wrecked condition. That’s because it can no longer sell it to the highest bidder.
- GAP policies vary, so it’s worth confirming what the retained salvage policy is with your GAP provider.
- You’ll still have to pay the remainder of your loan in full (regardless of the size of the insurance check), and your lender or lienholder cannot release the lien on the title until all debts are settled.
- In most states, your car will now have to have a salvage title, which both reduces the value and makes selling it more difficult.