What Happens If Your Car is a Total Loss?

Last Updated on December 28, 2025

A total loss happens when your insurance company decides your vehicle isn’t reasonable to repair after a covered loss (like a crash, theft, or storm damage). In most cases, that’s because the repair cost is too high compared to what the car was worth right before the loss.

If your car is totaled, the claim process changes. Instead of paying a body shop to fix your vehicle, the insurer typically offers a settlement based on your car’s value (minus any deductible that applies), and then the insurer takes the vehicle for salvage.

Below is a clear, step-by-step guide to how total loss claims work, what happens to your car, how payouts are calculated, and what to do if you disagree with the decision or valuation.

Key Takeaways

• A car is typically declared a total loss when repairs are too costly relative to the vehicle’s value—or when your state’s total loss rules require it.
• Total loss payouts are usually based on the car’s actual cash value (ACV) minus your deductible (if it’s a collision or comprehensive claim).
• If you have a loan or lease, the lienholder is usually involved and the settlement may be paid to the lender first—GAP coverage can matter if you owe more than ACV.
• You can often dispute a low valuation by correcting report errors and providing better local comparables, photos, and maintenance records.

What Is a Total Loss Insurance Claim?

A total loss insurance claim is a claim where the insurer determines the vehicle should be paid out based on its value rather than repaired. This most often happens when repair costs are too high relative to the vehicle’s value, or when state rules require a total loss at a certain damage level.

Total loss decisions are usually tied to your car’s actual cash value (ACV) (what it was worth immediately before the loss) and the estimated cost to repair the damage.

How Insurance Companies Decide a Car Is a Total Loss

Insurance companies don’t all total vehicles using the same method. The rules depend on your state and your insurer’s process. In general, states follow one of two approaches:

• Total Loss Threshold (TLT): The car may be declared a total loss when repairs reach a certain percentage of the vehicle’s value.
• Total Loss Formula (TLF): The car may be declared a total loss when repair cost + salvage value exceeds the vehicle’s value.

That’s why a vehicle can sometimes be totaled even if the repair estimate looks slightly lower than the car’s value. If you want the specifics for where you live, see our breakdown of total loss thresholds by state.

What Coverage Pays for a Totaled Car?

Which coverage applies depends on what caused the loss and who was at fault:

• Another driver caused the crash: You may file a claim against the other driver’s property damage liability coverage. (You typically don’t pay a deductible on a third-party claim.)
• You caused the crash (or fault is unclear): Your collision coverage may pay for the total loss, minus your deductible.
• Non-collision losses: Your comprehensive coverage may apply for theft, vandalism, hail, fire, or animal impacts. If you’re worried about premiums afterward, read do comprehensive claims raise your rates?

If your vehicle is totaled under collision, many drivers also wonder about the rate impact. This varies widely, but this guide explains the typical range: how much will your rates rise after a collision claim?

How Much Will Insurance Pay for a Total Loss?

In a total loss, most insurers start with your vehicle’s actual cash value (ACV) right before the loss. ACV is based on things like year, trim, mileage, options, condition, and local market pricing. Here’s a deeper explanation of how ACV is determined: how to find the actual cash value (ACV) for your car.

Your final payout is typically affected by a few common items:

• Your deductible (usually applies on collision/comprehensive claims, not on third-party claims)
• Condition adjustments (prior damage, worn tires, interior condition, etc.)
• Taxes and fees (some states/policies include certain taxes or title/registration fees—often tied to replacement rules)
• Salvage retention (if you keep the car, the insurer may subtract the salvage value from your payout)

For a more detailed walkthrough of payout calculations and what can be included, see: how much will my insurer pay for my totaled car?

What Happens to Your Car After It’s Declared a Total Loss?

Once the vehicle is officially totaled, the insurer typically moves toward taking ownership of the vehicle so it can be sold for salvage. While the exact steps vary by state and situation, the process often looks like this:

1. Valuation and settlement offer: The insurer provides a total loss valuation report and a settlement amount.
2. Paperwork and title handling: You’ll sign documents to transfer ownership (or authorize the insurer to process the title). If there’s a loan, the lender is involved.
3. Vehicle pickup/storage: The vehicle is moved to a salvage yard or auction partner (or remains at a tow lot until released).
4. Remove personal items and plates: You’ll be asked to remove personal property and, in many states, your license plates before the car leaves your control.

Your claims adjuster is usually the person coordinating these steps and explaining what you need to sign, send, or pick up.

Afterward, the vehicle may receive a salvage designation/title depending on state rules. If you ever plan to repair and re-register a salvage vehicle, you’ll want to understand insuring it afterward: how to insure a car with a rebuilt or salvage title.

Can I Keep My Totaled Car?

Sometimes, yes. If your vehicle has sentimental value or you believe you can repair it yourself, you may be able to keep it—depending on your state and insurer.

Start here if you’re considering that option: insurance wants to total my car but I want to keep it—can I?

When you keep a totaled car, the insurer typically reduces your settlement by the vehicle’s salvage value (because the insurer is no longer taking the salvage). Learn more about the process here: how to buy back a totaled car from an insurance company.

What If I Have a Loan or Lease on the Car?

If your car is financed or leased, you’re not the only party with an interest in the vehicle. The settlement usually involves the lender or leasing company, and the payment is commonly issued to both you and the lender (or paid directly to the lender first).

If you’re leasing, it helps to understand how insurance works differently: leased car insurance. If you’re financing, your lender is listed as a lienholder on your car insurance policy.

Important: If you owe more on your loan than the vehicle’s ACV settlement, you may have a “gap.” That shortfall is one reason many drivers consider GAP coverage or new-car protections when buying newer vehicles.

What If I Disagree With the Total Loss Decision or Settlement Value?

You can often challenge the valuation or negotiate the settlement—especially if the valuation report is missing options, uses incorrect mileage, or underrates your vehicle’s condition.

Strong ways to dispute a low offer include:

• Pointing out errors in trim, mileage, condition, or installed features
• Providing recent photos and maintenance records showing above-average condition
• Submitting better local comparables (same year/trim/mileage) that support a higher value
• Asking about the policy’s appraisal/dispute process (if available)

For a practical script and negotiation tactics, see: how to negotiate an auto insurance settlement.

What Comes Next After a Total Loss Settlement?

After settlement, most drivers use the payout to replace the vehicle. If you’re buying newer, it’s worth learning about optional protections that can help if a near-new vehicle is totaled again (like new car replacement or similar features): special car insurance coverage options for new cars.

One final note: for vehicles that are not totaled (repairable claims), you may sometimes be able to take a cash settlement and handle repairs on your own timeline. A total loss works differently unless you keep the vehicle as salvage. If you’re curious how that works in non-total-loss situations, see: can I keep cash from an insurance payout and not fix my car?

FAQs on Total Loss Insurance Claims

Final Word on Total Loss Insurance Claims

A total loss claim doesn’t have to be confusing, but it does require you to understand two things: (1) how your state determines a total loss, and (2) how your insurer calculated the vehicle’s pre-loss value. Review the valuation report carefully, keep everything in writing, and don’t hesitate to push back if the numbers are wrong.