How do I get a new car after a total loss accident?

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Totaled car on the side of a busy road. After a bad car wreck, the most important thing is that everyone is okay. We can replace totaled cars, but we can’t replace people. Still, the aftermath of a car wreck can be very stressful. Not only are you reliving what just happened, but you’ve also got a totaled car and are left trying to figure out what the next step is to get a new car.

If you’re looking into buying a car after a total loss, you’ve probably got a lot of questions. Fortunately, we have the answers.

What is a total loss?

Total loss is a term given to a car that has been so severely damaged in a car wreck that it would cost more money to fix it than what the car is worth. If your 10-year-old vehicle was worth $3,000 and it’s going to cost $10,000 to fix it, well, you can see why an insurer would consider it a total loss – and instead pay you $3,000.

Key Takeaways

The term total loss is given to a car that has been severely damaged in an accident, that it would cost more money to repair than the vehicle is worth.
The type of car insurance you have determines whether you will qualify for a total loss settlement.
In most states claims are processed in a timely manner, but it takes about two weeks to one month for an insurer to process the claim in most cases.
If your car insurance covers a rental, your insurer can help you get a rental car to drive until you have your new car.

How do I get a new car after a total loss?

Whether or not you will be eligible for a total loss insurance settlement depends on the type of car insurance you have. For example, if you cause and accident and have liability insurance only, you will not receive a payout for your totaled car. In that case, the other vehicle owners in the accident may receive the payout, but you will not.

If you want to make sure your vehicle is covered, too, make sure you have comprehensive and collision insurance. These are optional coverages that cover your vehicle, regardless of fault. Collision covers a car accident, while comprehensive covers your vehicle if it’s damaged due to hail, winds, flooding, animal strike or fire, and helps pay to replace it if stolen. . Both collision and comprehensive pay out up to the actual cash value of your car, and carry a deductible.

Assuming you have adequate insurance coverage, here are the steps to follow after a car accident:

Step 1 — File a claim

The first thing to do after the accident has occurred, the vehicles and drivers are safe and the police report is filed, is to call your insurance agent. The police report will help the insurance company get a head start on the claims process. If your car insurance policy covers a rental, the insurance company can also let you know how to get a replacement rental to drive until you have a new car.

What car insurance company you file your claim with is dependent on who was at fault in the accident. If you were at fault, then you’d make a collision claim for the damage to your vehicle (and will have a deductible due). If the other party was at fault, then you’d make a claim against the other car’s physical damage liability coverage for your car.

“I recommend making a claim against the other party’s insurance if you weren’t at fault. The reason being that you don’t have to pay a deductible, which you’d have to if you use your collision coverage, and that you won’t have this claim showing on your future claim reports,” says Penny Gusner, Insure.com’s senior consumer analyst. “Even if you’re not at fault, having a claim on your report may hike up your future insurance rates. Or maybe this one won’t raise your rates but if you are at fault in an accident a year from now, having two claims may cause a hike as the insurer then will be looking at the number of claims.”

Don’t skip the police report

It might be tempting after an accident where no one seems injured to avoid involving the police. There are several reasons we do not recommend avoiding the police after an accident. If you’ve got a police report to turn in to your insurer, this can help speed up the claims process. Even more important than the speed of the process, insurance companies in some states require you to file a police report with all claims.

Another important reason is that while no one may seem injured at the time of the accident, an injury could surface in the days after the accident. The police report will help determine which driver caused the accident and who will be on the hook for medical payments and lawsuits.

A third reason is even if someone says they were at fault at the accident scene, it doesn’t mean they will once they leave. In fact, the person may not respond to calls from the insurance company, which can put you in a bind to get the claim processed as the insurers want to talk to all drivers involved normally before making decisions on fault and continuing the claim. Having a police report can help you in such a situation by an outsider, the police officer, having a record of who said what at the scene and if the officer was able to assign fault.

Step 2 — Damage assessment

Your insurance company will send an insurance adjuster to assess the vehicle’s damages. If the adjuster determines the damage exceeds 65% to 70% (this threshold can vary due to state laws and internal insurance company guidelines) of the vehicle’s market value, your car will be considered a total loss.

The insurance company determines the actual cash value (ACV) of your car, or how much the vehicle is worth today considering depreciation and compares it to the cost of repairing it. If your insurer decides not to repair it (due to cost threshold or the damage makes it beyond repair) then the ACV is how much your insurance company will pay you for your totaled car.

Step 3 – Negotiate your payout

The car insurance company will give you an offer of what it believes your car is worth. If you agree, then the claim can continue to the paperwork stage.

If, however, you feel your car is worth more, you can try to negotiate for a higher settlement. You can’t get extra money for the sentimental feelings you have for your car, but you can for extras that maybe the insurer didn’t note or add value for in their report. If you have pictures of the excellent condition you kept your car in, provide those. But the biggest help to getting more money for your car is typically local area sales for the same year make and model that show it was worth more than the offer you received.

Negotiate by having proof that your vehicle would have been worth more if sold, in the condition it was in the day before the accident.

Step 4 — The paperwork

If you own your car outright, you’ll have to sign your car’s title over to the insurance company once you agree to the payout amount. Why? If the insurance company considers your car a total loss, they will pay you for that vehicle but then take ownership of it to try to recoup some of their payout.

If there’s still money owed on your car, your lender owns the car and so when your insurance company pays them off, the insurance company will get the title signed over to them.

You will also need to sign a total loss car insurance settlement agreement with your insurance company. This document is where you agree to the actual cash value they have assigned your car.

Step 4 — The check will go in the mail

Now that the insurer has determined the total loss, the value of your totaled car and you’ve signed in agreement; it is time for the check to be released.

If you financed the car, your financing company will get the check (or it will be in joint names and you’ll sign it over to them). If there is money left over after the car is paid off, it will come back to you. If you are upside-down on your car, owe more than it’s worth, you may still be left owing the finance company – unless you have gap insurance that pays that amount for you.

If you do not have a loan on the car, you will receive the full check and may use that money toward a replacement vehicle unless you decide to take the bus from now on and pocket the money instead.

But chances are, you’ll want and need another car. So, how do you get a new car after a total loss?

FAQ’s on how to get a new car after total loss

Will the insurance company buy me a new car?

Probably not, though it is OK to check with your insurance company. Some major insurance companies will replace the car if it’s a new car. But in most cases, you will be the one purchasing a replacement car. In this situation, most people will want to put the insurance check somewhere safe and start shopping around for vehicles. You can certainly do some scouting out of cars before you get the check, of course.

Depending on your location, your insurance company may be required to pay sales tax, title and vehicle registration fees on your replacement vehicle. Don’t forget to ask your insurance agent about this.

Do I need car insurance while I am between vehicles?

While you are between vehicles, keep your car insurance.

Even if you drop your car insurance for just a few weeks, there’s a chance that when you repurchase car insurance later, you’ll be paying a higher rate – 10% to 15% on average – than you were due to a coverage gap. Your insurer, especially if it’s a new insurer, may treat you as a high-risk driver, even if you’ve been driving with insurance for years.

So, keep the insurance, even if you drop down your coverages or limits while you don’t own a car. If you get a new policy when you get a new car, that’s fine. You just get the new policy and then drop the old policy.

How long should it take to receive the check for my totaled car?

Be sure to talk with your claims adjuster or insurance agent, but you’re looking at a couple of weeks to a month in most cases. Insurers don’t like to drag these things out, especially if they’re paying for you to drive around in a rental car. Most states have a timetable in which insurers must process claims, so if you feel it has been an unreasonable amount of time, contact the consumer division of your state’s department of insurance for help.

What happens if I total my car and the car is only worth $5,000, but I owe $8,000 on the car?

One of two things may happen:

Your insurer pays $5,000 to your lender, and you still have $3,000 to pay on your destroyed car that you can’t drive. This is a not-so-good situation if you don’t have $3,000 in savings.
Your policy may have gap insurance, which means that your insurer will pay $5,000 to your lender and the $3,000 gap to your lender (so the full $8,000 on the car). This is the ideal situation.

What if I want to keep my totaled car and fix it up?

You might be able to keep your totaled car — it depends on your insurer and state. If so, you’ll likely have to get an estimate of what the fair market value of your totaled car is (as in, what a salvage company would pay for it in its wrecked condition) and then the insurance company will deduct that amount from the total loss check that they send you. Remember, by paying you for the totaled car; the insurance company is essentially buying it from you. Also, if you want to keep your car, find out from your DMV what it will take to change the salvage title (what it becomes after the total loss declaration by the insurer) back to one that shows the car is roadworthy

How much does insurance go up after an accident?

Whether or not your rate will increase after a car accident depends on several factors including where you live, which company you have your insurance with, whether they offer any sort of accident forgiveness and who was at fault in the accident.

If you are at-fault in the accident, you can expect to see a rate increase from 26% to 32% at your next policy renewal.

What else do I need to know about buying a new car after a total loss?

Don’t rush the process. You’re understandably excited or anxious to buy a replacement car. Still, you’ll want to consider your budget, financing options, the type of vehicle you want, its safety features and of course, car insurance.

If you get a more expensive car than what you had your insurance premiums will likely increase. The more bells and whistles and gadgets on your car, the more expensive it is to repair – which means you may be getting a car that’s expensive to insure. Don’t forget to include insurance costs into your budget when shopping for a new car.

Geoff Williams

Contributing Researcher

Geoff Williams is a freelance journalist and author in Loveland, Ohio. He has been writing about insurance and personal finance since the mid-2000s. His work has appeared in numerous publications, including Life magazine, Ladies’ Home Journal, The Washington Post, CNNMoney, Entrepreneur, Forbes.com and U.S. News & World Report.