What Happens When Your Car Is a Total Loss?

The Short Answer: 

A car is considered a total loss in Tennessee when the cost to repair it exceeds 75% of its actual cash value (ACV). After an accident, your insurance company will inspect the damage, determine your car’s value, and offer a payout—usually the ACV minus your deductible. If you disagree with their valuation or face delays in getting paid, a car accident lawyer can help protect your rights and pursue the compensation you may be owed.

Wondering what happens when your car is a total loss? On this page, we’ll break down how insurers calculate total loss, what factors affect your settlement, how fault and coverage impact the outcome, and when it’s time to get legal help.

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Key Takeaways:

• Your settlement is based on your car’s ACV, which may be less than what you still owe if the car was financed or leased.
• Gap insurance can help cover any remaining loan balance if the insurance payout doesn’t fully pay off your car.
• Insurance companies usually take ownership of a totaled car, but you may be able to keep it by accepting a lower settlement.
• If your car was leased, the insurance check goes to the leasing company, and you may still owe the difference without gap coverage.
• Collision and comprehensive insurance are typically required to cover a total loss; liability coverage alone won’t apply.

What to Expect When Your Car Is Totaled

If your insurance company declares your car a total loss after a crash, here’s what typically happens:

1. Damage Assessment: Your vehicle is evaluated by the insurer to determine whether the repair cost exceeds a certain percentage of the car’s market value.
   
2. Valuation: The insurer calculates your car’s actual cash value—what it was worth just before the accident—based on age, mileage, condition, and comparable sales.
   
3. Settlement Offer: You’ll receive an offer equal to the ACV, minus your deductible if applicable. This is the amount the insurance company believes your car is worth.
   
4. Lienholder Payment: If you have a loan on the vehicle, the payout will go directly to the lender. If the car is paid off, the check goes to you.
   
5. Vehicle Ownership Transfer: The insurer typically takes possession of the totaled car. In some cases, you can negotiate to keep it, but your settlement may be reduced accordingly.
   
6. Next Steps: You can use the payout toward a new vehicle or to pay off remaining loan debt. If you disagree with the insurer’s valuation, you may dispute it with supporting evidence.

What to Do When Your Car Is Totaled and You Still Owe Money

If your car is totaled and you owe more than it’s worth, you may still be responsible for the loan balance—even if the car is undrivable. Insurance will only cover the fair market value of your car, not the full amount you still owe. For example, if your loan balance is $18,000 and your car is valued at $15,000, you’re on the hook for the remaining $3,000 unless you have gap insurance to bridge the difference.

Frequently Asked Questions

What Happens When Your Car Is Totaled but Still Drivable?

Even if your car still runs after a crash, the insurance company may still declare it a total loss. This usually happens when the cost to repair the damage exceeds a certain percentage (75% in Tennessee) of the car’s market value. In this case, the vehicle is considered “economically” totaled. You’ll likely be offered a settlement based on the vehicle’s pre-accident value, and in most cases, the insurer will take possession of the car. If you want to keep it, you may be able to negotiate to retain ownership, but your payout will be reduced by the salvage value.

Who Gets the Insurance Check When a Car Is Totaled?

If your car was financed or leased, your lender or leasing company has a legal right to be paid first. The insurance company will send the settlement check directly to the lender. If the check exceeds the balance you owe, the remaining amount may be issued to you. If the loan balance is more than the payout, you are responsible for paying the remaining amount unless you have gap insurance. If you owned your vehicle outright, you would receive the full settlement amount directly.

How Does Gap Insurance Work if a Car Is Totaled?

Gap insurance (Guaranteed Asset Protection) helps cover the difference between your car’s actual cash value (what the insurance company pays) and the amount you still owe on your auto loan or lease. Using the example above, if your car is worth $15,000 but you owe $18,000, your regular insurance policy will only pay $15,000, leaving a $3,000 gap. Gap insurance would step in to pay that remaining $3,000, preventing you from paying out of pocket for a car you no longer have. 

This type of coverage is especially helpful if you financed a vehicle with little or no down payment.

Is a Car Totaled if the Airbags Deploy?

Not necessarily. Airbag deployment is a major repair expense, but it doesn’t automatically mean your car is totaled. Insurance companies will assess the total repair costs—including airbag replacement—against your car’s market value. If the overall repairs exceed the value of the vehicle or cross the insurer’s threshold for totaling, it will be declared a total loss. If your car still holds enough value, the insurer may choose to repair it instead.

Do I Still Pay Car Insurance After a Total Loss?

Once your car is declared a total loss and the claim is processed, that vehicle is typically removed from your policy, and coverage ends. Remember, you should continue your insurance coverage if you plan to buy a replacement vehicle soon. If you’re financing or leasing a new car, your lender will likely require proof of continuous coverage. Canceling your policy prematurely could lead to higher rates in the future or leave you exposed to legal and financial risks.

How Much Will Insurance Pay for My Totaled Car?

The insurance company will pay the ACV of your vehicle at the time of the accident. This is based on factors such as mileage, condition, age, model, and local market prices for similar vehicles. Your deductible will be subtracted from this amount. If you disagree with their valuation, you can get a lawyer’s help presenting your own evidence like recent repairs, maintenance records, or price comparisons for similar vehicles in your area, to negotiate a better settlement.

Can You Ask for More Money When Your Car Is Totaled?

Yes, and it’s often a smart move. Insurance companies typically make initial offers based on their own calculations, which may undervalue your car. You have the right to dispute the offer. To make your case stronger and maximize your payout, provide documents like recent service records, proof of upgrades (e.g., new tires, stereo systems), receipts for maintenance, and local listings for comparable vehicles. A lawyer can also help challenge the valuation if the insurer isn’t negotiating fairly or is using inaccurate data.

After a Collision, Call The McMahan Law Firm

Navigating a total loss claim can be frustrating, especially if the insurance company’s offer doesn’t cover what you owe or doesn’t reflect your vehicle’s true value. At The McMahan Law Firm, we help accident victims understand their rights and push back against lowball settlements.

Our attorneys can review your case, dispute unfair valuations, coordinate communication with the insurer, and ensure all paperwork is handled properly. If your accident involved another driver’s negligence, we’ll also explore additional compensation options you may be entitled to beyond just vehicle damage. Reach out today for a free consultation and get the support you need to move forward.