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Does car insurance cover a write-off?
How your insurance declares your car totaled and how to insure a salvage car
When your car is towed away after a major car accident, you might be wondering if you’ll ever get to drive it again. Your options for dealing with a totaled car and any payouts depend on your car insurer and your state laws.
What's in this guide?
- What is an insurance write-off?
- Will my insurance cover a totaled car?
- When does a car get written off?
- How insurance companies calculate a write-off
- Car insurance write-offs by state
- Can my insurance company force me to total my car?
- What is a salvage title?
- How can I get salvage title insurance?
- Compare car insurance companies
- Bottom line
- Common questions about car insurance write-offs
What is an insurance write-off?
An insurance write-off happens when your insurance company pays you the value of your property like a car, rather than repairing it after an accident. For example, your car may get written off if it sustains so much damage that it won’t drive safely or isn’t worth the repair costs. In insurance terms, a write-off is also called a total loss.
Will my insurance cover a totaled car?
It depends on who caused the serious car damage and whether the reason for your accident is covered by insurance. For example, if another driver totaled your car, that driver’s car insurance should pay for the damage and your insurance wouldn’t kick in. But if you caused the car to swerve off the road and hit a pole, your insurance would pay if you have collision coverage on your policy.
When does a car get written off?
Whether your car gets considered a write-off depends on your state’s definition of a repairable vehicle. Your insurance company may take these factors into account:
The car is unsafe for driving.
This is usually the outcome if a car has suffered certain types of damage. While there are slight differences in the terminology used in the legislation in each state, cars generally fall into this category if they have:
- Excessive structural damage
- Excessive fire damage
- Excessive water damage
- Excessive stripping damage
The car is a repairable write-off.
Your car may fall in this category if the salvage and repair costs exceed either:
- The car’s market value before it was damaged or
- Your maximum insurance amount if you have agreed value coverage. Agreed value coverage means your car is insured for a value you and your insurance company agree on.
How insurance companies calculate a write-off
The criteria for write-offs can depend on the state you live in. Insurance companies may use several different formulas based on state guidelines to calculate whether a vehicle should get written off:
- Total loss ratio considers how much repairs might cost as a percentage of your car’s actual cash value. It gets calculated as the cost for repairs divided by actual cash value. States may set limits on how high the ratio between repair costs and car value can be before the car is considered a write-off. That ration can fall anywhere between 50% and 100%.
- Total loss formula considers your car’s repair costs and salvage value before declaring it a write-off. If the cost of repairs plus the salvage value totals more than the actual cash value, the car is considered a write-off.
- salvage value + cost of repair > cash value of vehicle = write-off
- salvage value + cost of repair < cash value of vehicle = repair
Car insurance write-offs by state
Each state sets its own laws determining when a car is considered totaled. For example, some states require a car to be written off when the cost of repairing the car is more than 75% of the value of the car. Other states have higher or lower thresholds, and some may use a total loss formula.
In some states, insurers may be given the final say in whether or not a car is totaled, provided they stick to all laws.
State laws for total loss threshold
Case study: A 2009 Nissan Altima gets written off
Catherine drives a 2009 Nissan Altima worth about $7,000. If she gets in an accident that causes $5,000 in damage, the total loss ratio is 71%.
In states like Oklahoma or Minnesota, the 2009 Nissan Altima would be considered a write-off. But North Carolina or Texas insurers might repair the car because it doesn’t meet their state’s total loss ratio.
Kelly Blue Book mentions the salvage value of a car is about 50% of its original value, or $3,500 for Catherine’s Nissan Altima. Since the cost of repairs plus the salvage value totals more than the car’s value — $8,500 — the car would get written off in states using the total loss formula.
Can my insurance company force me to total my car?
Your insurance company can’t force you to send your car to a salvage yard, but it usually decides whether or not your car should receive a salvage title. If your company wants to declare your car a write-off, you have several options:
1. Accept the write-off
If you accept your insurance company’s decision to write off your car, you’ll sign the paperwork and receive your settlement check in person or by mail within a few days or weeks. Your car will go to a salvage yard, and you’ll need to buy another car with the insurance payout.
However, the payout may total less than the cost of buying another car because your insurance typically pays out for your car’s depreciated value.
If you think your car’s market value is worth more, you can challenge or negotiate the payout. You can find your car’s market value from several dealerships and sources online to discuss them with your insurance company.
2. Keep your car with a salvage or rebuilt title.
If you want to keep your car, you can sign the paperwork to keep your car with a salvage title. Then, you can use the insurance money for repairs and to apply for a rebuilt title, if you prefer. However, you’ll inherit the mechanical or structural problems that car has, possibly leading to breakdowns and lower reliability on the road.
3. Challenge the insurance company’s write-off.
If the insurance company decides your car isn’t worth repairing, you can disagree with the repair costs quoted or your car’s salvage value. Gather a few numbers together before talking with your insurance company:
- Quotes from repair shops outlining the repair costs
- Quotes from salvage yards for your car’s salvage value
- Your car’s market value from Kelley Blue Book or dealerships selling the same model and year
If you give your insurance company this information before it declares your vehicle a total loss, you may get the assessment changed.
What is a salvage title?
When an insurance company writes off a car as a total loss, the car gets retitled as a salvage vehicle. In most cases, the company will sell the car to a salvage yard for parts and scrap metal.
If you owned the car before the accident, your insurance company can offer you the vehicle back after it’s totaled. However, the salvage value will get deducted from your insurance check. If you’re considering buying a salvage car that wasn’t yours previously, weigh the benefits and risks before you sign off on the car.
How rebuilt titles work
In most states, it’s not legal to drive a car with a salvage title. Once you’ve repaired the car and it’s safe to drive, you may be able to get a rebuilt or revived salvage title so that it’s street legal, but it will likely be difficult and expensive to get it insured. Once a vehicle has been totaled, its value is significantly decreased — even if you’re able to fully repair it.
How to get a rebuilt title
Every state outlines a different process for switching your car’s salvage title to a rebuilt title, proving that your car has undergone the proper repairs and Department of Motor Vehicle inspections.
Getting your rebuilt title might include these steps:
- A certified rebuilder repairs the car.
- You, the owner, fill out paperwork for the car’s registration, certified labor and parts and inspection request.
- You bring the paperwork along with photos of the damaged car and the salvage title to an approved inspection site. Your car may need to be towed there.
- You pay the inspection fee and pass the safety inspection.
- If approved, you may get notice by mail or at the inspection site.
How can I get salvage title insurance?
If you buy or keep a car with a rebuilt title, you’ll need car insurance to drive legally. However, your insurance company may make you jump through hoops first because it might consider your car a safety risk in an accident.
Consider shopping around for insurance before signing off on a salvage or rebuilt title car to make sure you can get the necessary coverage. What you can expect:
- An inspection. If you find a company willing to insure your car, it might require an inspection from a mechanic to verify your car’s safety and structure. Your insurance company might want an appraisal of the car’s value.
- Rebuilt title and registration. Next, your insurer may need proof of your car’s legal, roadworthy status.
- Liability only. Some insurance companies may provide only liability coverage. This avoids the risk of paying a claim for your car if it gets damaged in an accident.
- Agreed value. If the insurer agrees to offer physical damage protection, it might negotiate a set maximum amount to pay if your car gets totaled again.
Compare car insurance companies
Consider getting quotes after dealing with an insurance write-off. That way you know you’re getting the best deal for your salvage car or your next ride.
If your insurance company writes your car off, you can prevent a total write-off, challenge the decision or negotiate your settlement check. In the end, if you’re not happy with the result, compare other car insurance providers to find one with better claims service for the future.
Common questions about car insurance write-offs
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