There’s a reason that car crashes are also called accidents: they usually aren’t predictable or preventable. Regardless of how an accident happens or who is at fault, though, the damage can be a stressful nightmare.

In some cases, your vehicle may be so damaged that it is deemed totaled. But what exactly does that mean for you and your bank account?

What Does Totaled Mean?

If you’re involved in a car accident, your vehicle is likely to come away with some level of damage. The cost to repair this damage may vary, though, depending on how serious your accident was, the type of vehicle you own, and even your location.

When a vehicle costs more to repair than its worth, it is declared totaled. In most cases, insurance companies won’t waste time messing with repairs for a totaled vehicle. Instead, you’ll be offered a settlement.

How Do I Know My Car is Totaled?

Whether you were in a small fender-bender or flipped your car through a busy intersection, if you plan to file a claim for the repairs, you’ll need to have your vehicle inspected by an adjuster.

The adjuster may come to your home or may have you bring (or tow) the car to a body shop to get a repair quote. If it looks like your car may be a total loss, you could be asked to get a second repair quote from another mechanic or body shop to ensure that everyone agrees with the decision.

During this time, your insurance company will also assess the fair market value of your vehicle. This is done by looking at factors such as its age, mileage, location, and condition before the crash (for example, if it was already involved in a previous accident).

Then, they will compare the two numbers. If the cost to repair your vehicle is more than its value, it is deemed totaled. With some insurance companies, it may be considered a total loss even if the repair cost is 70-80% of the fair market value.

Related: Everything You Ever Wanted to Know About Car Insurance

Will Insurance Pay for My Totaled Car?

If your car is totaled in an accident, your first concern is probably whether or not insurance will pay to replace it. And the answer really depends on a number of factors.

If you are found not at fault for an accident and the other driver has at least liability coverage, they are obligated to pay you for the fair market value of your now-totaled vehicle (this does not apply to no-fault states).

There are some situations where you may have trouble receiving payment after an accident that someone else caused, such as if they are uninsured or if your vehicle’s value exceeds their policy’s coverage limits. In this case, your own auto insurance may step in to cover the expense if you have uninsured/underinsured motorist or collision coverage.

If you are found at fault for the collision, your own insurance policy will determine whether or not they will pay for the totaled vehicle based on the coverage you purchased.

  • If you have liability coverage only, your own insurance company will not pay for your vehicle if it was totaled in an at-fault accident.
  • If you have collision or full coverage protection and are at-fault, your insurance company will pay you a settlement for your totaled vehicle.

Unless your auto insurance policy includes special vehicle replacement provisions, you will only get the fair market value of your vehicle. This may or may not be enough to actually replace the car that was totaled, so you may still find that an accident could put you in a financial pinch even if it wasn’t your fault.

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What If I Still Owe Money on My Car?

One of the most frustrating situations when it comes to a totaled vehicle is what to do if you are still paying off the auto loan. After all, who wants to continue making monthly payments for a car that they no longer have?

However painful it may be, you absolutely need to continue making scheduled payments on your auto loan, even if your vehicle has been totaled and you are still going through the insurance claim process. Whether or not you are able to drive the vehicle–or even have it in your possession–has no bearing on your obligation to your auto lender.

Making payments late or skipping them altogether will only hurt your credit report and make it more difficult to purchase a replacement vehicle when you receive your insurance check.

Some drivers may find themselves in even a bigger pickle: they still owe more on their car than it’s actually worth. This negative equity situation also referred to as being upside down on the loan, can be a serious issue if you wind up totaling the vehicle.

Let’s say another driver runs a red light and hits you (the accident is their fault), but you still owe $12,000 on your car when it’s totaled. Their insurance company is happy to settle with you, but they claim the fair market value of your car was only $10,000 due to depreciation. This suddenly leaves you on the hook for the $2,000 difference and your auto lender will be expecting that payment soon.

If you don’t have that kind of savings at the ready, you may find yourself in a financial bind. Purchasing guaranteed asset protection (GAP) insurance coverage can protect you against this type of situation. It ensures that you aren’t responsible for any gaps between what you owe and what your vehicle is worth if it’s totaled, whether the accident is your fault or not.

Related: Best Auto Insurance Companies

Final Thoughts

No one ever expects to total their vehicle, but it happens to hundreds of drivers every single year.

Whether an accident is your fault or someone else’s, repair costs may wind up being more than your vehicle’s worth and result in a total loss. Depending on fault and insurance coverage, you may receive a settlement check for your car after the dust settles, which you can use to pay off your auto loan or buy a new car.

By purchasing adequate insurance coverage (and even a GAP policy) today, you can ensure that you’re protected no matter what happens on the road tomorrow.


  • Stephanie Colestock

    Stephanie Colestock is a respected financial writer based in Washington, DC. Her work can be found on sites such as Investopedia, Credit Karma, Quicken, The Balance, Motley Fool, and more, covering a range of topics such as family finances, planning for the future, optimizing credit, and getting out of debt.