If your car is totaled, do you still pay insurance?

If your car is totaled, you do not have to pay insurance. If your car insurance company determines that your car is a total loss after an accident or collision, then you will no longer be responsible for paying insurance premiums because you cannot drive it anymore. If you decide to repair and drive the car after a total loss, then you will still need insurance coverage.

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Tonya Sisler has a Bachelor’s Degree from the University of South Carolina in Journalism and has worked for 15+ years in management. She has also completed a proofreading certification and is currently a professional writer.

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Brad Larson has been in the insurance industry for more than a dozen years. He started out as a claims adjuster for a national carrier. He has since switched to the agency side of the business. Brad is licensed in all P&C lines.

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Reviewed by Brad Larsen
Licensed Auto Insurance Agent

UPDATED: Oct 28, 2020

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Here's what you need to know...

  • If the car insurance company determines that your car is a total loss, then you will no longer be responsible for paying for insurance on it because you cannot drive it anymore
  • Each insurance company will have a slightly different formula for determining whether your car is a total loss. In general, if the estimated cost of repair for the vehicle is more than 80 percent of the total value of the vehicle, then the car insurance company will declare that the car is a total loss
  • If you plan to sell your car after it is totaled, the new purchaser will need a salvage title on the car. This means that it cannot be legally driven until it is repaired and inspected by a state certified inspector
  • Sometimes, you may still want to repair a car if it is considered a total loss because the damage is more cosmetic and does not affect the ability to drive the car

If your vehicle is damaged to an extreme degree, it may be declared a total loss, depending on the formula that your insurance company uses. If the vehicle is deemed totaled, then the good news is that you are not required to pay for any more car insurance on that vehicle because you are no longer supposed to be driving it after the damage.

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When the Car Insurance Company Determines that Your Car is a Total Loss


After you file a claim through your auto insurance company for a damaged vehicle, a claims adjuster will be assigned to your case to assess the damage to your vehicle and confirm a reasonable estimate for the cost of repairing the damage to your vehicle. What happens next will depend on the value of your car as compared to the estimated cost of repairing the damage to your car.

Two of the major sources that insurance companies rely upon in determining the value of your vehicle are the National Association of Automobile Dealers and the Kelley Blue Book. Do not be surprised if the insurance adjuster tends to use the value that results in the lower payout for your vehicle.

In the event that the cost of repairing your car amounts to a certain percentage of the value of your vehicle, the insurance company may declare that your vehicle is a total loss. In this case, you will receive a settlement check from your insurance company for the value of the vehicle.

After you receive a settlement from your insurance company for a totaled car, you can no longer legally drive that car on state roads. This is not an issue at all if it is evident that the car is completely unusable from a structural and mechanical standpoint.

If someone attempts to purchase the car after it has been declared totaled by your insurance company, then it would be considered a salvaged title. This means that the car still cannot be driven on any public roads until the damage is repaired. At that point, the car would likely need to pass a state inspection before it can be properly registered and insured as a driveable vehicle.

In some states, there are serious penalties for “washing out” a title on a salvaged vehicle or trying to sell one that has not been properly titled.

Because the assumption is that you will not be legally allowed to drive a vehicle after you receive a check for it being declared a total loss, you no longer have to pay insurance on that vehicle.

The insurance company should take care of this automatically when issuing your settlement check. However, you should continue to monitor your premium so that if you notice the car has not been removed from your policy, you can dispute the rate with your insurance company.

When you replace your totaled vehicle with a new car, you need to notify your insurance company that the new vehicle must be added to your policy. There are various state laws that you must be careful to comply with in updating your registration and auto insurance information for a new vehicle that you buy.

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If You Owe Money on a Car Loan for a Totaled Vehicle


It can be a tricky situation if you are still paying off a car loan on your vehicle that is declared totaled by your auto insurance company. This can be especially problematic if the amount that you still owe on your car is greater than the value that the insurance company is going to pay out for your totaled car.

In this case, you will be responsible for paying out of pocket for the remainder of your car loan. Even though you will not have to keep paying for car insurance on that totaled car, you are not relieved of your obligation to pay off the remainder of the car loan.

If you fail to pay off the remainder of the loan, this could hurt your credit score, which may be a factor in whether your insurance rates go up in the future.

One of the ways that you can protect against this scenario is to purchase optional gap insurance. Gap insurance is a way to cover the difference between the value of your car and what you have left to pay on your car loan. It is an especially good option if you did not put a lot of money down on your car loan, leased your vehicle or bought a car that has a very fast depreciation rate.

When you are shopping around for auto insurance quotes, ask the agent whether gap insurance would be a good idea for your situation and by how much it would increase your premium. You may be surprised that for a relatively small increase in your rates, you could get significant coverage through gap insurance.

If You Don’t Agree with the Insurance Company’s Assessment of the Damage


In some cases, you may think that the car is not damaged as badly as the car insurance company says it is. On the other hand, you could receive an estimate from the auto insurance company for repair work that you think is too low for the repairs that need to be done to repair your car. You will need to try to resolve the situation directly with your insurance company first.

In either scenario, it is important to document all discussions regarding your claim with the insurance company. Make sure that you keep written records and follow up with all requests for information from the insurance company so that they can fully investigate your claim. Your failure to fully cooperate with the claims process may result in the ultimate denial of your claim or the cancellation of your policy by the auto insurance company.

If you cannot reach an acceptable resolution with the insurance company, you may need to retain an experienced attorney who will be able to negotiate on your behalf.

You should not wait too long after not receiving a satisfactory response from the insurance company to start pursuing legal remedies for your claim. The statute of limitations for your state may have a short timeline in which legal claims against your insurance company may be filed.

Another viable option is to report your insurance company to the department of insurance for your state. They may be able to give you guidance on how to proceed against your insurance company and may even investigate themselves.

Every insurance company has a duty to settle your claim in good faith. A failure to reasonably negotiate about the estimate of the repairs for your vehicle or a failure to adequately consider all of the evidence regarding the condition of your car would be indicative of bad faith on the part of the insurance company.

Filing a claim for bad faith against your insurance company should be the very last resort to resolving your claim. The process is very complicated, and you should strongly consider retaining a lawyer to discuss any potential bad faith claim you may have.

The Bottom Line on Car Insurance Payments for a Totaled Car


While it is never a good experience to have a vehicle declared a total loss, at least you do not have to continue paying your auto insurance premiums for that vehicle.

Your insurance company will take the totaled vehicle off of your policy automatically when your insurance settlement check is sent, but you should always follow up to make sure that they went through with that. When you go to buy a replacement vehicle, be sure to notify your insurance company right away so that you do not have a lapse in coverage and are totally covered for your new car or truck.

Compare auto insurance quotes online today to ensure your protection in the future; enter your zip code below to get started.

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