Does My Insurance Replace My Car After a Total Loss?

by Mary Jane Freeman
Your insurance company should either pay for or replace a totaled car.

If your car is totaled, your insurance company has the option of replacing it or cutting you a check for its value. However, you must have proper coverage before it will do so. If an accident caused the damage, your policy must include collision insurance. On the other hand, if another event caused the damage, such as vandalism or a tornado, you must have comprehensive insurance, which isn't the same thing.

Define Your Terms

To the average person, the phrase "total loss" probably means a car has suffered enough damage to make repairing it impractical or impossible. However, when dealing with auto insurance policies, it can mean several different things. For example, it can mean the damage is so extensive it can't be repaired safely, or that state law requires your car to be declared a total loss based on the extent of the damage, or repair costs would exceed your car's value.

The Right Stuff

If your car was totaled in an accident, your insurance policy must have collision coverage, which pays for damage to your vehicle caused by hitting another car or object. However, if the damage wasn't sustained in an accident, you must have comprehensive coverage, which pays for damage from events such as theft, vandalism, natural disasters, hitting an animal, or falling debris.

Car or Cash

Once you submit your claim to the insurance company, the carrier has the option to either replace your totaled car or pay you for it. If it chooses replacement, it must provide you with a comparable make and model that's in similar or better condition than the one being written off. Although state laws vary, the replacement car typically must be from a licensed dealer and under warranty if less than three years old. If you reject the replacement vehicle, the insurer must pay you what it was going to spend for the replacement, including tax, title and transfer fees. If the company elects to pay you for the totaled car, you will receive a check for the vehicle's actual cash value as of the date of the accident. Your insurer will look at a variety of factors, such as your car's mileage, condition, age, and resale value, along with the sales price of comparable vehicles in your area.

Replacement Can Cost You

Before your insurance company replaces your car it will likely require you to pay your policy's deductible. Depending on the policy you chose, this can be as little as zero dollars to more than $1,000. The higher your deductible, the higher your out-of-pocket costs. If you're receiving payment instead of a replacement vehicle, this amount will be deducted from the balance owed to you.

About the Author

Based on the West Coast, Mary Jane Freeman has been writing professionally since 1994, specializing in the topics of business and law. Freeman's work has appeared in a variety of publications, including LegalZoom, Essence, Reuters and Chicago Sun-Times. Freeman holds a Master of Science in public policy and management and Juris Doctor. Freeman is self-employed and works as a policy analyst and legal consultant.

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