Totaled Car: What It Means and How Insurance Companies Determine It

When your car is declared “totaled,” it means the cost to repair the damage exceeds the vehicle’s actual cash value (ACV)—essentially, fixing it costs more than it’s worth. This can happen after a major accident, flood, or other serious damage, and it often leaves drivers wondering what comes next.

In this comprehensive guide, we’ll walk you through every key stage of the process—from how insurance companies determine total loss and what coverage applies, to understanding state-specific total loss thresholds, title branding, and the claims process.

By the end, you’ll know exactly how to navigate each step with confidence and make informed decisions about your vehicle’s future.

Key Takeaways

• A car is “totaled” when repair costs exceed its actual cash value (ACV).
• Common causes include crashes, flooding, fire, theft, or severe weather.
• Insurers declare a total loss using repair estimates, appraisals, and state-set thresholds.
• Some states define total loss by percentage, often around 70–75% of vehicle value.
• You may keep a totaled car, but it will carry a salvage title with limited resale options.
• If you disagree with a valuation, you can provide documentation for re-evaluation.
• Collision, comprehensive, and uninsured motorist coverage can apply to total losses.
• Gap insurance may cover any loan balance that exceeds your car’s value.
• The claim process includes reporting the loss, inspection, valuation, settlement, and title transfer.

What Does It Mean When a Car Is Totaled?

When a car is considered “totaled,” it means the insurance company has declared it a total loss—meaning the estimated cost to repair the damage, plus related expenses, exceeds the vehicle’s actual cash value before the incident. Importantly, being “totaled” doesn’t always mean the car can’t be repaired—it simply isn’t financially practical to do so.

Cars can be totaled for a variety of reasons, including severe collisions, flooding, fires, theft, hail damage, or even animal strikes. Depending on how the damage occurred, either your collision coverage or comprehensive coverage will typically apply, helping determine how much compensation you’ll receive for your vehicle.

GEICO offers both comprehensive and collision coverage, along with several other optional add-ons, ensuring you’re protected across the wide range of events that can lead to your vehicle being declared a total loss.

How Insurance Companies Calculate a Total Loss

Insurers typically assess the damage and compare the estimated repair costs to the vehicle’s actual cash value (ACV) before deciding if it’s a total loss. In this process, they consider factors such as safety concerns, state regulations, and total loss thresholds—the percentage point at which repair costs reach a set proportion of the car’s value.

Total Loss Threshold by State

Some states set specific total loss thresholds—typically around 70–75% of a car’s actual cash value—to determine when an insurer must declare a vehicle totaled. For example, Alabama uses a 75% threshold, while Texas sets it at 100%, meaning repairs must equal or exceed the car’s full value before it’s totaled.

Not all states have fixed thresholds; in those cases, insurers rely on a Total Loss Formula (TLF) that compares the vehicle’s actual cash value to the combined cost of repairs and salvage to decide if it’s a total loss.

Can You Keep a Totaled Car?

If your car is declared a total loss, you may have the option to keep it through what’s known as “owner-retained salvage.”

In this case, the insurance company pays you the vehicle’s actual cash value minus the estimated salvage value, and the title is reissued as a salvage title, indicating the car was previously declared totaled. While you can repair and even re-register the vehicle (often under a “rebuilt” title after inspection), it may be harder to insure or sell later due to its salvage history.

Some car owners choose this route if the damage is mostly cosmetic, they have the skills or resources to repair it affordably, or the car holds sentimental value. However, because rules vary widely by state, it’s important to understand your local salvage title laws and insurance implications before deciding to retain ownership.

What If You Disagree With the Valuation?

If you believe your car’s valuation after a total loss seems too low, it’s important to review the insurer’s assessment carefully and share any supporting documentation, such as maintenance records, recent repairs, or proof of upgrades, that could increase its actual cash value. Insurance companies will typically re-evaluate the claim when credible new information is provided, potentially adjusting the payout to reflect the car’s true worth.

However, if you and your insurer still disagree after a re-evaluation, most policies allow for an independent appraisal process or arbitration to help resolve the dispute and ensure you receive a fair settlement.

Insurance Coverages That May Apply for a Totaled Car

Different types of insurance coverage can apply when a car is totaled, depending on how the damage occurred, such as collision coverage for accidents or comprehensive coverage for events like fire or flooding. That’s why having a well-rounded policy is highly recommended, ensuring you’re protected against the many unexpected situations that can happen on the road.

• Collision Coverage: Helps cover repair or replacement costs if your car is damaged in an accident, regardless of who is at fault.
• Comprehensive Coverage: Protects against non-collision losses such as fire, vandalism, flooding, or severe weather damage.
• Uninsured/Underinsured Motorist Property Damage Coverage: Provides protection if your car is totaled by a driver who has little or no insurance to cover your losses.

Get a free quote from GEICO today to get started on building a plan tailored to your unique needs!

How the Claim Process Works for a Totaled Car: Step by Step

When your vehicle is declared a total loss, understanding how the insurance claim process works can help you handle the situation smoothly and move forward with confidence. By following the key steps outlined below, you can ensure you’re compensated quickly and fairly—so you can get back on the road as soon as possible.

Step 1: Report the Claim

If your car is damaged and you suspect it may be a total loss, it’s important to file a claim with your insurance provider as soon as possible.

Here, you’ll need to provide basic details about the accident or incident, including when and how it happened, so the claims process can begin without delay. To help ensure a quick and smooth payout, include supporting documentation such as photos of the damage, police reports, and any repair estimates or maintenance records.

Step 2: Vehicle Inspection and Damage Assessment

After you file your claim, a claims adjuster or an approved inspection partner will examine your vehicle and estimate the cost of repairs. This evaluation helps determine whether the car can be repaired or should be declared a total loss based on its actual cash value. Typically, this process takes anywhere from a few days to a week, depending on the extent of the damage and the insurer’s workload.

Step 3: Determining Total Loss Status

Based on the inspection results, if the estimated repair costs meet or exceed your state’s total loss threshold—typically around 70–80% of the car’s ACV—your insurance provider will officially declare the vehicle a total loss. If the repair costs fall below this threshold, the insurer will approve repairs instead of totaling the car.

You’ll be notified promptly and provided with clear details explaining how the decision was reached.

Step 4: Reviewing Your Settlement Offer

If your vehicle is declared a total loss, your insurance provider will calculate its actual cash value, which is the market worth of the car just before the accident, based on factors like make, model, mileage, age, and condition. Your settlement will typically equal this ACV minus any applicable deductible.

If you disagree with the settlement amount, you can provide documentation to support a higher value, request a re-evaluation, or pursue an independent appraisal or arbitration, depending on your policy and state regulations.

Step 5: Handling the Title and Loan (If Applicable)

For vehicles that have a loan or lease, your insurance provider will usually send the total loss payment directly to the lienholder to cover the outstanding balance first. Any remaining funds or surplus will be handled according to the terms of your financing agreement. In many cases, your insurance provider can also assist with the necessary title transfer paperwork to complete the process smoothly.

Step 6: Finalizing Payment and Next Steps

Once all necessary paperwork is completed, your insurer will issue your settlement payment. If you have rental reimbursement coverage, it may continue until the settlement is finalized or you obtain a replacement vehicle, helping you stay mobile during the transition. The entire process typically takes anywhere from a few days to a few weeks, though it can vary depending on the insurer and the complexity of the claim.

For more, see how GEICO handles the process of a totaled car.

How GEICO Helps You Move Forward to Protect Your Car

GEICO is committed to making the total loss process as simple and stress-free as possible, guiding you through every step from filing a claim to receiving your settlement.

Each state’s laws and guidelines are carefully considered when determining total loss, ensuring your claim is handled accurately and fairly. With features like quick claims service, transparent vehicle valuations, and support in finding a replacement car, GEICO helps you navigate a challenging situation with clarity and confidence. With our guidance, you can move forward knowing you’re in capable hands and ready to get back on the road.

Get a free quote today to see how GEICO can help with all of your car insurance needs.