If your car is in an accident and the insurance company believes that the cost to repair the car exceeds the real value of the car, they may declare your vehicle to be a total loss. Usually the next step is that they will take your totaled car and give you a cash payout rather than fix it.

But it's important to understand that the way an insurance company evaluates a wrecked car may be very different from how its owner evaluates it. In other words, every car labeled a total loss by an insurance company is not beyond repair. If your totaled car is still drivable or can be repaired, does it make sense to buy the car from the insurance company, or fix it and keep driving it?

The one-size-fits-all answer is "probably not." In a few specific cases, however, it may make some sense.

What Defines "Totaled"?

In the language of auto-insurance pencil pushers, a car is totaled when, by the company's established formula, the cost of returning a car to its former glory exceeds its repaired value. Rarely is this an absolute cost versus a numbered value. If the cost of repairs is more than 60 percent or so of the restored value of an older car, the insurance company might declare it totaled. It depends on the age, mileage and real-world value of the car.

Barring other issues, the insurance company will cut a check for the value of a totaled car minus whatever deductible is involved. The value of the car, however, is not determined by how much you paid or how much you owe. The selling price of the car may come into play, but if you overpaid, you might not get that money back.

The insurance company then sells the car as scrap to a salvage yard, pocketing the cash.

Keeping the Car

If most of the damage is cosmetic, the car would probably be repairable and just as safe to drive as before the accident. In such a case, keeping it would be an option to consider.

To keep it, the insurance company must first be convinced. Once an agreement is struck, you won't receive a check for the car's entire value. From the payout, the insurance company will subtract the deductible, along with deducting the estimated amount it would have received from a salvage yard. It may also deduct some other costs or fees. You can then use whatever is left to make the needed repairs, which are now your responsibility. It's smart business to know what the repairs will cost before launching efforts to keep the car.

Other Considerations

Although you may not see eye to eye with an insurance company as to whether a car is a total loss, there are some other considerations when deciding whether or not to try to keep it:

  • Any incident severe enough for an insurance company to declare a car a total loss may well cause undetected damage lurking beneath the sheet metal. Hidden damage discovered once repairs begin could run up costs well beyond the car's value. Moreover, other damage, such as a cracked frame, might not be found at all but would still make the car unsafe to drive.
  • Once a car is declared a total loss by an insurance company, its title receives a brand indicating a prior condition, such as "flood," "salvage" or "reconstructed." This is a red flag that might prevent you getting the car insured or create difficulty trading it in or reselling it.

What It Means to You

Only in rare cases does it make sense to buy back your totaled car. If you make that choice, do so with your eyes open. Know what the repair costs will be and ensure that your insurance company will reinsure the car once it's fixed.

author photo

Russ Heaps began covering the automotive industry in 1986, first overseeing the automotive pages of the Boca Raton News and then the Palm Beach Post in Florida. In 2001 he became managing editor of AMI Auto Week and NOPI Street Performance Compact magazines. Since leaving AMI he has freelanced his auto reviews and industry analysis to the Washington Times, Hispanic magazine, Journal-Register Newspapers, Bankrate.com, MyCarData.com, Interest.com, and others. He resides in Greenville, SC.

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