What do auto insurance companies do with totaled cars?

It can be confusing to determine when a vehicle involved in an accident is considered totaled. The rules around totaling a vehicle are complicated. It is important for you to understand how total loss claims work, and what is most likely to happen to your totaled car.

So, what do insurance companies do with totaled cars? Do insurance companies sell totaled cars? At what point is a car considered totaled? Keep reading to find out the answers to these questions and more. 

What happens to a totaled car? 

The next question you might be wondering is, what happens to cars that are totaled? Where do totaled cars go? The process differs from state to state, but typically, the insurance company will take ownership of the totaled car and label it as “salvage.” At that point, where do insurance companies sell totaled cars?

The insurance company will pay the insured the pre-loss ACV of the car. A useful tool to find this value is the Kelley Blue Book, or the KBB ACV calculator. It will then send over the ownership certificate, the license plates, and the required fees to the Department of Motor Vehicles (DMV).

The DMV will issue a salvage certificate for the car and then sell the totaled car to a salvage yard vendor who will resell it based on state-specific regulations. There states that require sales tax be paid as part of total-loss settlements, but the requirements may vary.

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When is a car considered totaled? 

What does a totaled car mean? Exactly what deems a car a total loss? And what does an insurance company do with a totaled car? Wrecked cars are considered to be a total loss by insurance companies when the cost of repair is higher than the actual cash value (ACV) of the car. Practically speaking, it isn’t always viable to repair a car, even when that cost is lower than the cash for the totaled car. For example, a vehicle worth $5000 needing repairs worth $4500 will be considered totaled by the insurer. 

The criteria for deciding total loss differs from company to company and are governed by state laws. For example, the California total loss threshold may vary from the Tennessee total loss threshold just as the State Farm total loss threshold could differ from the Allstate total loss threshold.

In most cases, insurance companies will consider a vehicle totaled when the repairs are likely to cost 75% or more of ACV, and if that’s the case, the insurance company will sell the total loss car. How much do insurance companies sell totaled cars for will vary. You might be curious about certain company processes, like what does State Farm do with totaled cars or where does Progressive take totaled cars?

Contact those specific company you’re interested in to find out details about what does the insurance company do with totaled car.

However, in some states, a car will be totaled if the damage exceeds the Total Loss Threshold (TLT) for the car. The TLT is how high the damage ratio must be before the car is eligible for a salvage title. The TLT ranges between 50%-100% depending on your state. For instance, the Arizona total loss threshold could be different from Michigan’s total loss threshold.

Do you have to accept an insurance company’s totaled car settlement?

Once your car has been totaled and is declared a total loss, the insurance company will offer a settlement based on the fair pre-accident value of the vehicle. You are not expected to accept the first settlement offer. You can drive up the total loss settlement if you negotiate the amount of cash for any totaled cars. You can calculate the value of your totaled car and accurately reflect its value by presenting the following points: 

• If some features of your car weren’t added to the appraisal estimate you can ask your adjustor to add those features to drive up the car value
• Ask the insurance company to narrow down the inventory of cars from the comparable list 
• Request that your insurer expand the search area if there are no comparable cars in your area
• Adjusters might have a little room to increase the valuation of your car, simply ask them for a better price
• Show them your listings and local ads

Doing your homework and presenting these arguments can often help you get a better settlement. 

Your Options When Your Car Is Totaled

Your car is totaled, so what now? To start, you will have to finalize the total loss car insurance claims process. First, a settlement offer will be sent to you. Once you accept the offer, you will be asked to sign a power of attorney and transfer the title of your car to the insurance company, which answers the question of what happens to the title when a car is totaled. 

While signing the power of attorney for a totaled car and then handing the totaled car to the insurance company is a common practice, it isn’t a requirement. 

Read more: How to Get an Attorney Auto Insurance Discount 

So, if a car is totaled can you keep it? Yes, you can opt to keep your vehicle. You may decide to do so for sentimental purposes or because you can get the damage repaired on your own. Note that in the case you decide to keep your car, you will not receive the full settlement payment. Rather, your offer will be decreased by the salvage value for the total loss vehicle. 

If you’re thinking about keeping a salvage-certified car, research well before you come to a decision despite the car’s salvage value. Get several repair estimates from qualified mechanics and find an insurer who will insure a totaled car. Note that few are willing to provide insurance for a salvage vehicle, so make sure your vehicle qualifies for auto insurance for salvage cars before coming to a decision.

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The Bottom Line on What Happens to Totaled Cars

So ultimately, what does insurance do with totaled cars? Totaled cars will be certified as salvage and will be sold off by the insurance company to a salvage vendor working with the DMV. However, you usually have the option to keep your salvaged car. Is there totaled car insurance? No, not exactly.

While you might want to do so for sentimental reasons, it’s best to make the decision after getting the repair estimates and finding an insurance company that is ready to insure it after you’ve thoroughly learned what do insurance companies do with totaled vehicles.

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