Insurance Advice: My Car Was Totalled, Now What?
If you've spent any amount of time on the road, you've likely driven past your fair share of collisions and wrecked vehicles. There are various levels of car accidents; some collisions only cause minor damage and are relatively inexpensive to repair.
However, this isn't always the case — in the event of a serious accident, like a head-on collision, there's a high chance that your vehicle will be deemed “totalled” by your insurance company (also known as a totalled car, total loss or a write off).
Are you currently asking yourself questions like, "how do insurance companies determine if a car is totalled?" or "my car is totalled now what should I do?" then you're in luck.
START A QUOTEOur team has compiled a list of commonly asked questions about totalled vehicles and what you should do after being in a serious car accident in Canada.
What does "totalled" mean in regards to car insurance?
So, what exactly does totalled mean? When an insurance company determines that a car is totalled, it means that the vehicle is damaged to a point where it would cost more to repair than the actual cash value.
Even if a totalled car is technically driveable, it is no longer legally roadworthy (unless you jump through a handful of hoops, but we'll touch on that again in a bit).
How does an insurance company determine if a car is totalled?
Now that we have a solid understanding of what totalled means, we can discuss how insurance companies determine if a car is a write-off.
Most auto insurance providers use a very similar formula to determine the status of a potentially totaled vehicle.
If the salvage value and cost to repair your vehicle exceeds the actual cash value of a car, then your insurance company will deem it totalled. On the other hand, if the salvage value cost to repair your vehicle is less than the actual cash value of your car, then it's deemed repairable.
Here's a quick example:
Let's imagine that you were involved in a t-bone collision, which seriously damages your vehicle. After contacting your insurance company, you learn that it will cost $13,000 to fix your vehicle. Unfortunately, the actual cash value of your vehicle is only $7,500, which is less than the repair cost. Because of this, your vehicle is considered "totaled".
However, if it only cost $2,500 to repair your vehicle, your insurance company would likely deem it repairable.
FAQs about totalled cars in Canada
Here are some of the most commonly asked questions that we receive about totalling a vehicle in Canada. Have you ever asked yourself any of the questions below?
How often do drivers total vehicles in Canada?
If you've recently had your car totalled, you can take solace in the fact that you're far from alone.
Total losses are much more common than you'd think — for instance, approximately 17% of vehicle-related accidents result in total losses. Considering that there are roughly 300,000 auto collisions in Canada each year, we can crunch some numbers and determine that over 50,000 vehicles get totaled annually (talk about a grand "total").
My car was totalled — what's going to happen to my auto insurance premium?
The answer to this question depends on a handful of factors, primarily who is at fault.
If you were determined at-fault (insurance jargon for responsible for an event) for an auto accident that results in a total loss, you would likely see a rise in your auto insurance premiums.
Thankfully, if you're not deemed at fault, you will receive coverage without causing your premiums to skyrocket.
What if the remainder of my car loan is more than the actual cash value of my vehicle?
This is a great question!
As you likely know, drivers are required to make vehicle payments each month (unless they purchased the model outright, but this is rare). Each time you make one of these payments, a small amount of your loan is chipped away.
However, as you're working on your loan, your vehicle depreciates (a term that means losing value over time). Suppose you total a vehicle with a particularly fast depreciation rate. In that case, you may end up in a situation where the actual cash value of your vehicle is less than the remainder of your loan. If this happens, your insurance company won't be able to cover the entire loan.
This is where a unique type of coverage called gap insurance comes into play. Gap insurance is a special add-on that covers the remainder of your loan if your vehicle is totalled or stolen. Gap insurance is offered by dealerships and financing companies when you purchase a new car in Canada.
Here's a quick example:
Let's imagine that you bought a new vehicle for $30,000, but you still owe approximately $25,000. If you accidentally totaled your car, your collision insurance will cover the vehicle's actual cash value (in this situation, let's imagine it's $22,750).
If you don't have gap insurance, you'd have to pay the remaining $2,225. However, if you do have gap insurance, your insurer will cover the rest of your loan.
My car was totalled now what is going to happen to it?
After a car is totalled, you can let your insurance provider dispose of it, or you can potentially purchase it back from them.
If you let your insurance provider dispose of it, they will sell it to a scrap yard or auction it off as soon as possible. Insurance companies generally move quickly in order to avoid paying for long-term storage.
On the other hand, if you enjoy tinkering with old vehicles or the car has sentimental value, you do have the option to purchase it. If you opt to re-purchase your vehicle, your auto insurance provider will remove the salvage price of your car from the settlement.
If you do choose to do this, you should know that the vehicle won't be roadworthy right away (or potentially ever again). Your auto insurance provider will either deem your vehicle irreparable or give it a salvage title.
Vehicles deemed irreparable can never be driven; however, you can scrap them for parts. On the other hand, if your vehicle receives a salvage title, it can be driven after passing the necessary inspections.
