Are you in the unfortunate situation of having your car declared a total loss after a car accident? It can be a confusing and stressful time, but one important question that needs to be answered is: who gets the insurance check when a car is totaled?
To get to the depth of this situation, read on to find out who gets the insurance payout when your car is declared a total loss – and what steps you need to take to ensure you get what you’re owed.
Here are some statistics you may need to know. According to data from the National Highway Traffic Safety Administration (NHTSA), in the United States in 2019, there were approximately 6.8 million motor vehicle crashes, which resulted in about 2.5 million vehicles being damaged to the point that they were considered to be a total loss.
From the above data, the deduction is that about 37% of the vehicles involved in crashes in the United States in 2019 were declared to be a total loss. Keep in mind that this is just an estimate, and the actual number of total loss vehicles may be different.
When is a car considered totaled?
When your car is totaled, it means that the cost to repair it is higher than the current value of your car. Car totaled also implies that your car is damaged beyond repair such that it is going to be so difficult to safely repair your car.
For example. If the current market value of your car is $5,000, and after a car accident the insurance company discovers that it will cost $6,000 to repair it, then the insurance company has nothing left to do other than declare your car total loss.
How do states define ‘totaled’ differently?
In normal circumstances, it remains a decision of your insurance company to declare your car a total loss or not.
But some states have separate policies that guide insurance companies while making decisions to declare car total loss after a car accident. For example, if you are living in Alabama, your car will be totaled if the costs to repair it exceeds 75% of its current market value.
Here is an example of how your car might be totaled in the state of Alabama. Assume the current market value (Actual cash value) of your car is $4,500 and after a car accident, the body shop demands $337,5.
Since 337,5 is approximately 75% of $4,500, any repair costs in the north of $337,5 will likely force the insurance company to declare your car totaled.
What happens if my car is totaled in an accident?
what happens if your car is totaled depends on so many factors. If you are the car owner, the insurance company will compensate you with an amount that is equal to the market value of your car just before the car accident.
For instance, if it is estimated that the value of your car before the accident was $3,000, the insurance company will give you $3,000. If you are claiming through comprehensive or collision coverage, your check will be less by the deductible as agreed upon in your insurance policy.
For example, if you chose $500 as your deductible, the insurance company will issue you $2,500. You are expected to pay your deductible of $500 from your own pockets.
Who gets the car insurance claims check if I cause the accident?
Who gets the car insurance check if you caused the accident depends on whose car is totaled. Is it your car? or the car that belongs to the other party.
If you own the totaled car, you are the person that will receive the payout check. If you are not the owner of the car you were driving, the owner of the car like the leasing company or bank receives the paycheck.
If the other party’s car is totaled, still the owner of that totaled car receives the car insurance settlement check. There is a likelihood the person driving the car is not the owner. Whoever the owner receives the settlement payout less by the deductible as explained above.
Who gets the claim check if my car is a total loss?
The role of any car insurance coverage is to restore the policy owner to his/her financial position as just before the accident.
Insurance companies do this by covering your car repair costs, replacing your car if it is totaled, covering your medical expenses, and compensating you by paying for damages like pain and suffering.
If you were driving a $10,000 worth car and you owned it, the insurance company will help you pay the market value of your car as estimated to be before the accident. The insurance company will deduct the depreciation value and pay you an amount that will help you replace your car.
You may end up receiving $10,000 or less depending on the depreciation rate, tear & wear, deductibles, etc. Most likely your settlement payout will be less than $10,000. After declaring your car a total loss, the owner of the car receives the insurance payout.
Getting an Insurance Check for a Totaled Car?
What I need to let you know is that the processes involved in getting an insurance check for a totaled car vary from state to state, and also differ by the insurance company.
If your car has been declared a total loss, you may be entitled to receive a settlement from your insurance company to compensate you for the loss of your vehicle. Here are the general steps you should follow to get an insurance check for your totaled car.
1. Report the accident to your insurance company: Contact your insurance company as soon as possible to report the accident and begin the claims process.
2. Have your car assessed: Your insurance company will send an adjuster to assess the damage to your car and determine whether it can be repaired or if it is a total loss.
3. Negotiate the settlement: If your car is declared a total loss, your insurance company will offer you a settlement based on the value of your car before the accident. You can negotiate this settlement if you believe it is too low.
4. Receive the check: If you and your insurance company agree on the settlement amount, you will receive a check for the agreed-upon amount. That amount could be less by a deductible and other depreciation factor.
5. Pay off any outstanding debts: If you have a loan or lease on your car, you will need to use the settlement check to pay off the balance. If you own your car outright, you will be able to use the settlement money to purchase a new car.
How Your Car’s Value Is Determined?
I recently spoke to Lucas who recently had his Jeep totaled by Geico. According to Lucas, There are several factors that can affect the value of your car, including its make, model, age, mileage, condition, and any modifications that have been made.
Lucas went on to tell me, “When determining the value of a car, insurance companies will often use a combination of resources, such as industry guides, online valuation tools, and market data, to determine its worth”
According to Elijah, who works as a claims adjuster at one of the top insurance companies in California, “One of the most commonly used resources for determining the value of a car is the Kelly Blue Book”.
“The Kelly Blue Book is a well-known guide that provides estimates of the value of new and used vehicles based on a variety of factors, such as the make, model, and age of the vehicle, as well as its condition and mileage”, says Elijah.
In my own opinion and expertise, Insurance companies may also use other industry guides, such as the National Automobile Dealers Association (NADA) guide, to determine the value of your totaled car.
Other methods insurance companies use to determine the value of your totaled car include the use of online valuation tools, such as those provided by Edmunds or Carfax, to get an idea of a car’s value. These tools use data from a variety of sources, including sales data, to provide estimates of a car’s worth.
What if the Accident Wasn’t Your Fault?
If you caused the accident in which someone else’s car is totaled, the other party will negotiate a settlement with you or through your insurance company. If you have no insurance company, be ready to pay from your own pockets.
If you carry insurance coverage, the other driver whose car is damaged in the accident you caused will claim through your liability insurance coverage. The other party has a right to recover their car costs and other compensatory or punitive damages from you.
The other person you injured is entitled to medical bills reimbursement, and other damages like pain and suffering, loss of consortium, lost potential to earn, disability, property damages, and others.
What Types of Coverage Will Pay for a Totaled Car?
The type of coverage that pays for a totaled car depends on whose fault is the accident. Almost all major insurance policies pay for a totaled car but the coverage that pays depends on if you are the at-fault driver or not.
If you are the at-fault driver and your car is totaled, your will file a settlement claim through your insurance company. Your collision coverage and comprehensive insurance coverage are the coverages that will pay for your totaled car.
If you are not the at-fault driver, the other party’s liability insurance coverage will pay for your totaled car. You also have the option of filing your claim through your collision coverage even though the car accident is not your fault.
Do I still have to pay a loan on a totaled car?
Many of us drive leased or financed cars today. This is what happens if we assume you still owe $20,000 on your car loan and unfortunately your car is totaled.
Assume the insurance company determines that your totaled car was worth $17,000 before the car accident. Your financing company will receive a $17,000 check from the insurance company and you will need to pay $3,000 from your own pockets to make it the $20,000 that you still owe on the car.
If you carry GAP insurance coverage, you will not pay this $3,000 from your own pockets. Instead, your GAP insurance coverage will kick in and cover the difference between what you owe on your financed car and the current market value of your totaled car.
My car’s airbags deployed — is it a total loss?
Deployed car Air bags do not automatically imply getting your car totaled. The insurance company will assess the cost of replacing your car’s airbags and the total cost to repair your car.
If it costs more to replace your airbags in addition to repairing other damages compared to your car’s actual cash value, the insurance company will be happy to save their dollars and so will pay you the actual cash value.
If the cost to repair your deployed airbags is less than the actual cash value of your car, the insurance company will be happy to cover the cost of repairing your car. Your car will not be totaled. Insurance companies love saving their money and will choose the cheapest option possible.
What if the Insurance Payment Isn’t Enough To Pay Off Your Loan?
I already explained this scenario in one of the paragraphs above. To re-echo this, let me use another example.
Assume a situation you still owe $25,000 on your car whose actual cash value is $24,000. If your car is totaled, the bank that financed your car will receive $24,000 from the insurance company.
Of course, the above insurance payment ($24,000) will be less than the $25,000 you still owe on your car. If the insurance payment isn’t enough to pay off your loan, you will be forced to pay the difference from your own pockets. To avoid such scenarios, it is advisable to buy gap insurance.
Who gets the claims check if my car is leased?
The company that leased you the car owns the car but not you. Assume you leased a car and you are paying $500 monthly for 36 months. Assume that according to your lease agreement, your contract has a residual price of $26,000.
Assume a scenario that your leased car is totaled after 30 months down your lease period.
Typically you will still owe a 6 months lease payment ie 6x$500 = $3,000. If your leased car is totaled, your lessor would expect you to pay $3,000. Usually, the insurance company will issue a $29,000 ie ($26,000 + $3,000) to the company that leased you the vehicle.
No company will let you drive the leased car from the lot unless you bought full car insurance coverage. You will also need to buy gap insurance coverage which for instance covers $3,000 in the above example, whereas standard policies pay $26,000.
Do Insurance Rates Increase After a Car Is Totaled?
Whether insurance rates increased after a car is totaled only depends on whether you caused the car accident or not. One of the many factors that raise your premium rate is negligently causing an accident.
If you caused an accident, your insurance rates will increase irrespective having gotten your car totaled or not. According to ValuePenguin, some insurance companies can increase your insurance rate by up to 49% after your at-fault accident.
Who gets the insurance check when there is a loan on your car? In conclusion, when a car is declared a total loss, the insurance company will typically pay out a settlement to the owner of the vehicle to compensate for the loss.
If the car was financed or leased, the lender may also have a claim to the settlement, and the owner may be required to pay off the balance of the loan or lease before receiving the remainder of the settlement.
It’s important to understand the terms of your insurance policy and work closely with your insurance company to ensure that you receive a fair settlement for your totaled car.
By following the steps outlined in your policy and staying informed, you can navigate this process and get the compensation you are entitled to.