Do you have to pay a deductible if your car is totaled? Whether or not you’ll have to pay your deductible when your car is totaled depends on whose fault the accident was, whether or not they had insurance and possibly one or more other factors.
Several considerations come into play when a car is considered a total loss, and you might end up paying more than your deductible – or get extra money back.
Read More: What Are Car Insurance Deductibles?
When Is a Car Totaled?
A car is considered “totaled” when it will cost more to fix the car than it’s worth. Some states have specific guidelines that determine when a car is totaled for insurance value, explains Allstate. For example, if the damage is more than 75 percent of the car’s value, the insurance company can declare the car totaled.
Whose Fault Was It?
Whether or not you’ll have to pay your deductible largely depends on who was at fault. If someone else caused an accident that totaled your car, their insurance will pay for the claim and they will have to pay their deductible. If the person is uninsured, your uninsured motorist coverage should pay your claim.
In this case, since you’re using your insurance, you’ll have to pay the deductible. What if it’s no one’s fault, such as a tree falling on your car? Your insurance will cover the claim, but you’ll have to pay the deductible, according to American Family Insurance.
Read More: What Happens When You Total a Leased Car?
What's the Total Calculation?
Insurance companies use industry valuations to determine the fair market of a particular car when it is being considered for a “total” determination. The insurance company then gets a repair estimate (or several) as part of the total loss settlement process.
If it’s going to cost $11,000 to repair a car worth $9,000, the insurance company would rather pay you the $9,000 value of the car than give you $11,000 to get it fixed.
If the insurance company determines that your car is worth $7,000 and you still owe $8,000 on it, you’ll have to come up with the extra $1,000 to pay your lender – and you’ll still have to pay your deductible if your insurance is paying the claim.
Who Gets the Car?
When an insurance company totals a car and pays you the money for the value of the vehicle, they are buying the car from you and you will sign the title over to them. If you want to keep the car and think you can get it repaired for less than the insurance company paid you, you can make an offer to buy it back.
Insurance companies often sell totaled cars for less than they paid for them, so you might be able to offer less than your total check. For example, your insurance company will probably sell your car to a junkyard, salvage buyer or repair shop for less than what they paid you.
If you got a $9,000 check for your totaled car, ask your insurer what they want for the car. They might offer to sell it to you for the same low price they were going to get from the junkyard or salvage company.
Do I Owe/Get Money?
In some cases, the fair market value of a totaled car is less than what you still owe on your loan. This all depends on the loan you arranged, where the car market is that year, the mileage on the car and how well you took care of the vehicle.
If the insurance company determines that your car is worth $7,000 and you still owe $8,000 on it, you’ll have to come up with the extra $1,000 to pay your lender – and you’ll still have to pay your deductible if your insurance is paying the claim. This is one reason people buy gap insurance – it covers the difference between a total value and the amount you still owe on the car.
Read More: How to Dispute a Car Insurance Total Loss Valuation
Can I Challenge the Claim?
The amount of money you get when your car is totaled might not be enough to help you buy or lease a new vehicle that was as nice as the one you were driving, or that you need going forward. If you want to keep your damaged car, you can challenge the total finding.
If you feel that the fair market value of your car is worth more than the insurance company has estimated, or you feel the repair estimate is too high, contact your insurance company and tell them you want to challenge their numbers.
Make sure to think about how to negotiate with car insurance adjusters about car total loss valuations before you make your call. For example, if your insurer estimates the repairs at $8,000 and you can find a reputable body shop that will repair the car for $6,000, get a written quote (not just an estimate) from the body shop and submit it to your insurer.
You can have your car valued by one or more dealerships to see if you can get a higher valuation. Using either a lower repair estimate or higher fair market value estimate, or a combination of both, you might get your insurance company to change their determination that your car needs to be totaled.
Be careful when trying to keep a badly damaged car. With today’s reliance on sophisticated electronics built into the body, a car that looks like it has only cosmetic damage might have serious problems once the repair shop starts taking the car apart. You might also have to pay much more to get the car insured in the future, explains Insure.com.
Steve Milano has written more than 1,000 pieces of personal finance and frugal living articles for dozens of websites, including Motley Fool, Zacks, Bankrate, Quickbooks, SmartyCents, Knew Money, Don't Waste Your Money and Credit Card Ideas, as well as his own websites.