What happens if your car is totaled before you pay it off?

Asked by: Raina Gleason  |  Last update: May 31, 2025
Score: 4.5/5 (9 votes)

Let's say your totaled car's ACV is $10,000. If you still owe $12,000 on your car loan, your insurer will cut your lender a check for $10,000 and you'll still owe $2,000. As painful as it is, you're legally obligated to make your monthly loan payments to the lender until the loan is paid off.

What if my car is totaled and I still owe?

Here's the bad news: if you have a loan or lease out on a totaled car, you're still responsible for paying off the remaining balance. Usually, the insurer pays the lender or leaseholder first and gives you the rest of the settlement money if there's any leftover.

What are the rules for total loss in Arizona?

A.R.S. §28-2091(T)(4). 28-2091 details the rules regarding total loss in Arizona. According to our state, insurance agents can consider a vehicle a total loss if the actual cash value of the vehicle is less than or equal to the costs to repair the car plus the salvage value.

Can you ask for more money when your car is totaled?

Absolutely, you can negotiate an auto insurance offer for a total loss. Negotiating is KEY especially when fault is split. It's common for insurance companies to start with a lower offer. Show them your evidence, like repair estimates or the car's value, to argue your case.

How does a gap work when a car is totaled?

Gap covers the difference between an insurance payout for a totaled car vs the loan amount you still owe. So if your car is totaled by the insurance and they only give you $5000 but you still owe the bank $7500. Gap Insurance will cover the $2500 to make you whole.

What happens when your car is totaled and you still owe money?

22 related questions found

Do I get a gap refund if my car is totaled?

If your insured car is declared a total loss and your GAP policy pays out the difference between the car's value and your loan balance, you won't be eligible for a refund for the remaining months of coverage.

What happens when your car is totaled but still drivable?

Rebuilt/Reconstructed Title: Once a salvage vehicle has been repaired and inspected, the California Department of Motor Vehicles (DMV) will issue a "rebuilt" or "reconstructed" title for the vehicle. Once you obtain this, you can legally drive the vehicle.

Who gets the insurance check when a car is totaled?

If you own the car outright, you will receive the check. If not, the check goes to the leasing company or the lender, otherwise known as the lien holder. If you owe money on the vehicle, you should notify the lending company that your car has been totaled.

What happens if you don't agree with a total loss adjuster?

Sometimes, insurance adjusters and policyholders disagree on the car's value. When you don't agree with the settlement amount, you can negotiate with your adjuster. They assess the damage and determine how your coverage applies to damages and injuries. to get a better insurance payout.

Is it better to keep a totaled car?

Resale Value and Safety: A vehicle with a salvage title typically has a lower resale value because it's been damaged and repaired. Additionally, there may be lingering safety concerns, as it can be challenging to fully assess a previously totaled vehicle's structural integrity and safety.

Can you fight a total loss claim?

Once you have strong evidence to challenge the insurance company's assessment, you can initiate negotiations with the insurer to change its mind on the total loss declaration or increase the settlement offer.

What is the loss limit?

A loss limit is a property insurance limit that is less than the total property values at risk but high enough to cover the total property values actually exposed to damage in a single loss occurrence.

Can you negotiate a total loss amount?

Frequently Asked Questions about Total Loss Negotiations

Absolutely, negotiating a settlement offer is not only possible but often necessary to ensure you receive a fair payout. Insurance companies may initially provide a low offer, hoping you'll accept it without question.

What happens to your credit when your car is totaled?

Can a totaled car affect my credit? No. A total loss alone won't affect your credit. However, if you still owe payments on your car, you should continue paying your loan until the claim is settled.

How do you argue the value of a totaled car?

If you believe the insurance company underestimated the value of your vehicle, try these steps:
  1. Ask for the Valuation Report.
  2. Research the Comparables on the Valuation Report.
  3. Dispute Any Condition Adjustments on the Comparables.
  4. Send Your Own Comparables to the Adjuster.
  5. Consider Hiring an Appraiser.

Do you have to accept insurance offer on a totaled car?

Most insurance companies want to pay minimum amounts on claims. That means that compensation offers are often unreasonably low. They count on the fact that many people assume they have no choice but to accept those offers. You don't have to take an unfair offer; you can negotiate for more money.

What should you not say to a loss adjuster?

Understand that everything you say whether in person or over the phone, can be used against you in their final assessment. Avoid providing incomplete or potentially detrimental information that could be used to lower the settlement offer, like failing to mention pre-existing damage.

What to do when your car is totaled and you still owe money?

If your car is totaled and you still owe on it, but the accident was not your fault, contact the at-fault driver's insurance company with your lender information. To maintain your good credit, you should continue to make your loan or lease payments until the insurance company issues payment to your lender.

Can a total loss be reversed?

If the total loss claim has already been finalized and the payout issued, reversing the process is almost impossible. However, there are rare exceptions: Fraud or Mistakes: If you believe there was an error in the valuation or the claim was mishandled, you can dispute the claim.

Will insurance fix a totaled car?

When a vehicle is totaled, it means the insurance company believes it isn't worth repairing. The insurer may replace your totaled car with an equivalent one or offer you a cash payment equal to your car's value. If you believe the insurer's offer is too low, you can challenge it.

What is the total loss law in Minnesota?

If your vehicle sustains extensive damage in a crash, your insurance company may declare it a “total loss.” Under Minnesota law, a vehicle may be declared a total loss if the cost of repairing the damage is greater than 70 percent of the car's pre-crash “actual cash value,” which is the amount necessary to replace the ...

Is it legal to drive a car that has been totaled?

Some states, including California, require a salvage title for totaled cars legally driven on the road. This entails obtaining approval from the Department of Motor Vehicles (DMV) and adhering to the state's minimum insurance requirements.

How do I get more for my totaled car?

6 Steps to get the most money from insurance for your totaled car
  1. Ask for the valuation report. ...
  2. Conduct your research on the value of your vehicle. ...
  3. Gather and provide supporting documentation. ...
  4. Consider getting a third-party appraisal. ...
  5. Negotiate with your insurance company. ...
  6. Get what is rightfully yours.

How do adjusters determine if a car is totaled?

To make this determination, insurance adjusters will consider the vehicle's age, mileage, and pre-accident condition. The vehicle is regarded as a total loss if the repair costs exceed your state's total loss threshold, which is often between 65% and 75%.