What is a total loss car insurance settlement?

A total loss car insurance settlement is the amount of money you can receive from your insurer after your vehicle is deemed a total loss. Learn more. (Shutterstock)

Getting into a car accident is scary. And in addition to potential physical injury, you may need to worry about replacing your vehicle. When an insurance carrier determines that your car is "totaled," that typically means the cost to repair the vehicle is more than the current value of your car. Having vehicle insurance is critical to getting reimbursed if your car is totaled in an accident. This reimbursement is known as a total loss car insurance settlement.

Read on to learn what you need to know about total loss car insurance settlements.

With Credible, you can compare car insurance quotes from top insurance carriers in minutes.

• What exactly is a total loss car insurance settlement?
• Who pays for a total loss?
• What factors affect a total loss car insurance settlement?
• What if you disagree with the settlement?
• What to do after your car is declared a total loss
• Will your insurance cover a total loss if you finance your car?

What exactly is a total loss car insurance settlement?

A total loss insurance settlement is the amount of money your auto insurance provider offers you based on your vehicle's pre-accident market value. The insurer will look at the car's pre-accident condition, additional features and current sales prices of the same model with the same features, and in a similar condition, to estimate a cash value. 

If you still owe money on your vehicle, your insurance carrier will issue the payment to the lender or lease company. 

Who pays for a total loss?

In most cases, an insurer will cover the cost of your totaled vehicle. If you were at fault in the accident and have collision coverage, your insurance provider will pay the cash value (minus any deductible). The same is true if you have comprehensive coverage and an unexpected covered event (like a fire) totals your car. If you weren’t at fault and the other party has insurance, their car insurance policy will cover the cost of your vehicle through their property damage liability coverage. 

You may need to pay some or all of the costs if:

• You were at fault and only have liability insurance.
• You were at fault, and you have collision coverage, but you need to pay a deductible.
• You were at fault, and you have collision coverage, but the cash value offered is less than what you owe on the vehicle.
• You weren’t at fault, but the other party is uninsured or underinsured, and you don’t have uninsured or underinsured motorist coverage.

What factors affect a total loss car insurance settlement?

When an insurance carrier determines the settlement offer for your totaled vehicle, it considers several factors, including:

• Age of the vehicle: All cars depreciate over time, so you’ll likely get less than what you initially paid even if the vehicle is totaled shortly after purchase.
• Condition of the vehicle pre-accident: Insurers will consider any damage to the exterior or interior of the vehicle before the crash, as well as the car’s history of mechanical issues.
• Mileage: The number of miles on your vehicle affects the car's value.
• Additional features: Most vehicles are worth more if they have extra features like back-up cameras, lane-changing sensors, leather interiors or heated seats.

What if you disagree with the settlement?

It’s important to know that you don’t have to take the first settlement offer from the insurance carrier. If you want your insurer to reconsider the settlement offer, follow these steps: 

1. Review the settlement offer and appraisal documents. Look for missing features that could add value.
2. Hire your own appraiser. If you disagree with the insurance adjuster, you can hire a private appraiser. Keep in mind that you’ll have to pay for this out of your own pocket.
3. Look for recent sales or ads that show the same model in similar condition listed for higher. Provide proof to the insurance carrier that your offer should be higher.
4. Provide a counteroffer. After completing your research, send your counteroffer and accompanying documentation to your insurer.
5. Enter a complaint with your state’s insurance department. If your insurance provider disagrees with your counteroffer, you can file a complaint with the insurance department in your state.
6. File a lawsuit. If nothing else works and you still believe you should receive more for your total loss settlement, consider hiring an attorney to file a lawsuit.

What to do after your car is declared a total loss

The time after a car accident can feel a bit chaotic and overwhelming. You should do a few things as quickly as possible following your accident. 

1. Contact your insurance provider to file a claim. The claims process can take some time, so you’ll want to start quickly. Your insurer can also help you get a rental car quickly if you have a rental policy.
2. Collect documents. Collect all vital records, including any gap insurance paperwork, loan documents, accident reports and photographs. Your insurance carrier may ask for these.
3. Wait for the adjuster. Your insurer will send an adjuster to inspect the damage. The adjuster will then estimate how much it’ll cost to replace your vehicle.
4. Contact your lender. If you still owe on your vehicle, contact your lender to let them know your car was totaled. After you accept the total loss insurance settlement, your insurer will send the payment to your lender.
5. Contact your gap insurance company. Your insurance carrier should provide documents to your gap insurance company, but you may need to act as the go-between if there are hiccups. 
6. Wait for your settlement. You’ll receive a settlement check if you own the vehicle outright. Otherwise, your lender will get the payment.

Will your insurance cover a total loss if you finance your car?

In most cases, lenders require borrowers with loans on their vehicles to have full coverage car insurance. If you’re at fault for an accident and have full coverage insurance, your insurer should cover most of the cost of the vehicle (minus your deductible). You may need to cover any difference between the actual cash value of your car and what you owe on your loan.

Since cars depreciate quickly, your insurance provider may offer a settlement lower than what you owe on your vehicle. You're responsible for any difference if there’s a balance after the insurance pays out. If you opted for gap insurance when you purchased your vehicle, the gap policy should cover any difference between what you owe and the insurance payout. 

With Credible, you can compare car insurance quotes from various insurance providers, all in one place.