Who Gets the Insurance Check When a Car is Totaled?

A major accident is scary and dangerous, but after the fact, you’re left wondering about the repair costs and what insurance will cover. If your vehicle is so damaged that it would cost more to repair than replace it, the insurance company will declare it totaled. So, who gets the insurance check when a car is totaled? That depends on whether you’re still paying off the car or if it’s fully yours. Let’s dive into how this works and what you might expect in terms of payment. 

Table of contents

• What does it mean for a car to be totaled?

• What happens to my car if it’s declared totaled?

• Who gets the insurance check when my car is totaled?

• How long does it typically take for the insurance company to process a totaled car claim?

• What types of insurance will cover the cost of a totaled car?

• How is the actual cash value (ACV) of a totaled car calculated?

• Can I negotiate the ACV of my totaled car with the insurance company?

What does it mean for a car to be totaled?

According to car insurance companies, a car is totaled when the cost to repair the car exceeds a percentage of the car’s value, usually 75%. 

Insurance companies will look at the following:

• Vehicle age

• Vehicle mileage

• Points of impact from the accident

• Repairability

• Airbag deployment

With these signs, depending on your coverage, your auto insurance company may reimburse you for the current market value of your vehicle. If your car is old, has high mileage, or has extensive damage to the frame, your insurer will probably consider it totaled.

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What happens to my car if it’s declared totaled?

In most cases, if the car is declared totaled, the insurance company takes possession of it and pays the policyholder the actual cash value of the vehicle before the accident. If the car is financed, the insurer typically pays the lender first; any remaining value will go to the owner or policyholder. 

After the insurance company takes possession of the car, it is usually sold to a salvage yard, auctioned off as a salvage vehicle, or sold for parts. Sometimes, the owner may choose to keep the car, but it will have a salvage title. 

If the vehicle totaled is part of a logistics business, you can file a report with the U.S. Accident Management Center (AMC).

Who gets the insurance check when my car is totaled?

How much you’ll get paid depends on whether you own the vehicle outright. If you still owe money on an auto loan, the lender will be paid by the insurer first. If you own the car without any loans or liens, you will receive a check for the value assessed by the insurance company. If there is a loan, the check usually goes first to the leasing company or the lender.

If you owe money on the vehicle, you should notify the lending company that your car has been totaled. Lenders typically require payment in full for the loss of your car, which is usually paid directly by the insurer. In some cases, the insurer will pay you, and you’ll be responsible for the full repayment of the loan. 

In addition, who the insurance policyholder is will affect the payout. In most cases, the policyholder is the vehicle’s registered owner, so they are entitled to the insurance payout. When a lienholder, such as a bank or financial institution, has a financial interest in the vehicle, it may receive the payout directly, and you’ll receive the difference between what was owed to the lender and the assessed vehicle value. 

Example 1: You own an SUV valued at $20,000. You had an auto loan on it but have already paid it off, so you own the vehicle outright. When the insurance company takes possession of the vehicle, you’ll receive a check or a transfer for the value of $20,000, minus any deductible you have on the policy. 

Example 2: You own a vehicle valued at $20,000. You took an auto loan for $15,000 and have paid back $8,000. When the insurance company took possession of the vehicle, the lender received a check for $7,000, the remainder of the loan value. You receive a check or a transfer for the value of $13,000, minus any deductible you have on the policy. In some cases, the lender will receive the full $20,000 check and then send you a check for the difference. 

How long does it typically take for the insurance company to process a totaled car claim?

It can take anywhere from a few days to a few weeks for an insurance company to process a totaled car claim, although it could take up to 30 days. Some states have requirements limiting insurance companies’ time to process claims, ensuring you get your payout faster. 

What types of insurance will cover the cost of a totaled car?

Not all insurance policies cover a totaled car, such as specialized insurance for young drivers or high-risk drivers. The three main types of coverage that may pay for a totaled car are collision coverage and comprehensive coverage.

1. Comprehensive coverage

Generally, comprehensive coverage covers the vehicle’s value when it is destroyed by fire, weather-related events, vandalism, theft, or other issues that aren’t covered by collision coverage or related to a driving accident. With comprehensive car insurance, you’ll get the full value of the totaled car minus any deductible.  

2. Collision coverage

If the vehicle collides with another vehicle, a guardrail, a tree, or a building, collision coverage will cover the car’s value minus any deductible. Collision coverage usually covers any collision, regardless of whether it’s your fault or another driver’s. If there is a deductible, you’ll be responsible for that amount. 

3. Full-coverage car insurance

If you have full-coverage car insurance, it generally rolls comprehensive coverage, collision coverage, and liability coverage into a single insurance policy. This insurance will cover the full value of the totaled vehicle, regardless of the reason for the damage, minus any deductible.   

How is the actual cash value (ACV) of a totaled car calculated?

ACV is used to determine how much of a payout you will receive for a totaled vehicle. A totaled car’s ACV is the assessed market value at the time of the accident or loss. The vehicle’s age, mileage, condition, and pre-existing damages can all affect ACV. Your insurance company will calculate ACV by subtracting depreciation, damages and wear and tear from the market value to reach the replacement cost value.

Can I negotiate the ACV of my totaled car with the insurance company?

Yes, you may negotiate with the insurance company. If you believe the insurance company’s valuation is too low, you can negotiate and provide evidence to support your claim for a higher ACV. To build sufficient evidence, consider including recent sales listings of comparable vehicles in your area or repair quotes from trusted mechanics.

Protecting Your Vehicle

If you’ve got adequate insurance coverage, even if the worst happens, you’ll recoup the vehicle’s market value. While it may take some persistence to get the claim through — and you can always negotiate — the crash doesn’t have to be a financial loss, even if processing takes time. Whether the vehicle is financed or not, its current market value will determine your payout. 

FAQs 

Does the insurance company deduct the deductible from the settlement amount for a totaled car?

The insurance company will deduct the deductible from the settlement amount for a totaled car before making the payment. 

Can the insurance company deny my claim for a totaled car?

Yes, the car insurance company may deny a claim for a totaled car. Generally, this happens if the type of accident isn’t covered by the insurance policy. For example, if you have liability insurance and the accident was the fault of another driver, the insurance company may deny the claim. 

What happens if I still owe money on a loan or lease for a car that is totaled?

If you still owe money on a loan or lease after the car is totaled, the insurance company will generally pay either the full claim value or the remainder owed to the lender. After you settle the debt, you’re entitled to the difference.