Understanding Total Loss
When a car is deemed a total loss after an accident, typically when repair costs exceed 70-80% of the car's actual cash value (ACV), the insurance company will pay out the ACV minus any deductibles.
Vehicle Ownership Status
Owned Vehicles
If you own your vehicle outright, the insurance company will issue the settlement check directly to you as the registered owner. If there are multiple names on the title, the check may be made out to all listed owners.
Financed Vehicles
For vehicles with an outstanding loan:
- The lender (lienholder) has first claim to the insurance payout
- The check is usually made out to both you and the lender
- Any remaining amount after paying off the loan goes to you
Leased Vehicles
With leased vehicles, the settlement typically goes to the leasing company since they technically own the vehicle:
- Insurance company determines the actual cash value (ACV)
- Payment is sent to the leasing company
- You're responsible for any remaining lease payments or gap amounts
Gap Insurance
If you have gap insurance, it covers the difference between what you owe on the vehicle and the actual cash value paid by insurance. This coverage is particularly useful for new cars that depreciate quickly and ensures you're not left paying on a loan for a car you no longer have.
Steps to Take After a Total Loss
- Contact Your Insurance Company: Notify your insurer immediately to start the claims process
- Understand Your Policy: Review your coverage, including any gap insurance
- Communicate with Your Lender or Leasing Company: Inform them about the total loss
- Negotiate the Payout: If necessary, provide evidence of recent repairs or upgrades
- Plan for a Replacement Vehicle: Consider your options for purchasing or leasing
Documentation Required
- Clear vehicle title
- Loan payoff information
- Current registration
- Valid identification
- Power of attorney (if applicable)
Potential Deductions
The final payout may be affected by:
- Deductible amount
- Outstanding loan balance
- Unpaid insurance premiums
- Storage fees
- Towing charges
Important: Always review your insurance policy's total loss provisions to understand exactly how payments will be handled in your specific situation.
After the Settlement
Once the insurance company issues payment, several steps may follow:
- Signing over the vehicle title
- Returning license plates
- Canceling vehicle registration
- Removing insurance coverage
- Collecting personal belongings
For more detailed information, visit the Insurance Information Institute or the National Association of Insurance Commissioners website, or consult with your insurance provider directly.