Being in a car accident is a traumatic experience, even if you emerge from it unscathed. Unfortunately, the trouble does not end once you’ve dusted yourself off. You now have a financial liability on your hands.
In many cases, a major collision leads to a car being ‘totaled’. The term refers to the insurance determination that it is a total loss, although it is not used only in the context of insurance. Any car that would cost as much as or more to repair than to replace is considered totaled.
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What happens next? Hopefully, you have insurance which will pay your claim. Even so, there are factors to consider, including the amount your insurance goes up after an accident like this. Also, who determines whether a car is totaled or not?
Here is what you should expect when your car may be totaled.
Who is at fault?
If another person was involved in the collision, the insurance claim will have to be filed by whoever was at fault, if that can be determined. Often, both drivers will claim that the other was at fault. If there are no witnesses or evidence, you’re unlikely to come to a conclusion. But if there are witnesses who can corroborate your version of events, or video evidence, the at-fault driver’s insurance will have to pay.
Of course, if there is no third party involved, you can go straight to your own insurer. The kind of claim you will make depends on what type of insurance you have.
Claim from insurance
Your insurer will tell you what documents or evidence you need to provide for your claim. If you have collision cover, your insurance will pay for damage incurred in a collision. If you have comprehensive cover, they will also pay for a car totaled by things out of your control, such as weather-related incidents or a collision with an animal.
What happens if an at-fault driver does not have enough insurance to cover your claim? In that case, your collision cover will pay. Some people get uninsured motorist property damage (UMPD) and underinsured motorist property damage (UIMPD) insurance rather than collision or full coverage. This will cover you if you don’t have collision cover and the at-fault driver does not have any or enough insurance.
Your car is assessed and the claim is paid
In some cases it is obvious that your car is totaled. However, you still need it to be assessed by an expert. Your insurer may send someone or ask you to get an assessment from an expert. If they find that it is not worth repairing your car, your insurer will pay out the full value for which your car is insured.
This value may not be the same as what you paid for the car. If your car has depreciated as it is a few years old or has some dents and scratches not related to this accident, they will only pay for the value of a car in this condition.
What happens with a financed car?
Chances are you’re still paying off your car. If this is the case, your insurance will pay your claim to the provider of the loan (with whatever is left going to you).
It is possible that the value of your car that the insurer pays out will not be enough to cover the amount you still owe on your car. If you have gap insurance, your insurer will cover the difference. If not, you will have to pay the difference or continue paying the loan until it is fully covered.
As long as you do not miss payments, your credit will not be negatively affected and you can get a new financed car.
How much will your insurance premium go up?
Car insurance premiums are calculated based on a number of factors. One important factor is your claims history. For this reason, after a major claim, your premiums will increase. The amount your premiums increase will depend on who was at fault, how big the claim was, and more.
Now, the ins-and-outs of insurance when you are in a collision become complex when we start to talk about at-fault and no-fault states. In short, different states in the US have different laws when it comes to who is supposed to claim from insurance after a collision. In some states, it doesn’t matter who was at fault, and everyone has to claim from their own insurance. Depending on the laws in your state, your premiums may rise even if you were not at fault (or may not rise even if you were at fault).
The complexities of at-fault and no-fault insurance can get confusing, and you should find the specific laws related to your state. If you’re struggling to find the right information, ask your insurer. They will have all the details, as they regularly deal with claims in your state.
What if you are uninsured?
Unfortunately, if you are uninsured and you were at fault for the collision, there is nothing you can do. If your car was financed, you will need to continue paying it off even though you no longer have a driveable car. This is why it is so important to have collision coverage.
You cannot guarantee you won’t be in an accident. Even if you are an excellent driver, someone else may cause a collision and you may not be able to prove they were at fault.
The above should give you some insight into what happens after you total your car. Remember that this only deals with the financial impact. A collision that totals your car can be traumatic, and you should consider speaking to someone about it.