Getting into a car accident can be a traumatic and stressful experience. Dealing with insurance claims, car repairs, injuries, and other consequences only adds to the disruption of your life. One of the most confusing situations is when your car is deemed a total loss or “totaled” by the insurance company after an accident.
You may be wondering – who actually gets the insurance payout when a car is totaled? Does the money go to you as the owner, or does it get paid to the bank that financed your car loan? What happens if you still owe money on the vehicle?
This guide will explain how total loss claims work in California and outline who gets the insurance check when your car is totaled after an accident.
What Does It Mean When a Car is Totaled?
When your car is totaled, it means that the insurance company has determined the vehicle is too damaged to be reasonably repaired. Specifically, the cost of repairing the car exceeds a certain percentage of its pre-accident actual cash value (ACV).
In California, most insurance companies consider a vehicle to be a total loss when repairs would cost more than 80-100% of the ACV. For example, if your car was worth $10,000 before the accident and the collision damage would cost over $8,000 to fix, the insurer would likely total it out.
Once a car is declared totaled, the insurance company will pay out the ACV to the appropriate parties and then take possession of the damaged vehicle. With a total loss, you can’t keep driving the car – it must be turned over to the insurer or salvaged.
Who Gets the Insurance Payout on a Total Loss Claim?
When a car is totaled after an accident in California, there are a few possibilities of who will receive the insurance settlement check:
You Own the Car Outright
If you own the vehicle free and clear without any outstanding loan or lease, the insurance check will typically be paid directly to you. After all, you own the car and don’t owe anything on it.
The insurance company will send you a check for the ACV of your totaled car, minus your collision insurance deductible.
Your Car Loan isn’t Paid Off
Most people don’t own their cars outright – they make payments on an auto loan from a bank or financing company. In this case, the insurance settlement check is issued to both you and the lender that financed your vehicle.
Here’s how it works:
- The insurance company determines the ACV of your totaled car, say $15,000.
- Your loan balance is $18,000.
- The insurer issues the $15,000 check to you AND your lender.
- You must endorse the check before giving it to the financing company.
- The lender applies the $15,000 to your outstanding loan balance.
- You are still responsible for the remaining $3,000 balance on the car loan.
- The lender sends the vehicle title to the insurance company.
This ensures the financial institution gets repaid (at least partially) when their collateral asset is totaled. You will likely have to continue making payments on your car loan if the insurance payout doesn’t fully cover the remaining balance.
Your Car is Leased
The process is similar if you lease instead of finance your car. The insurance check will be made payable to you and the leasing company. The leasing company takes the settlement, pays off your lease obligation, and then forwards the title to the insurer.
As with a loan, you are responsible for any remaining lease payments even after the vehicle is totaled. The insurance payout rarely covers the full buyout amount on a lease.
Can You Keep a Totaled Car in California?
In some cases, it may be possible to keep a totaled vehicle after settling with the insurance company in California. This is known as a “retained total loss.”
Here are a few scenarios where you may be able to retain a totaled car:
- You own the car free and clear. Without a leinholder involved, you have full ownership rights to keep or dispose of the vehicle as you choose.
- Your lender permits you to keep the car. If you have equity in the vehicle and a permissive lender, they may allow you to keep possession after being paid the ACV by insurance.
- You buy the car back from the insurer. Some insurance companies will give you the option to buy back the totaled car for its salvage value before they dispose of it.
- Your policy has storage coverage. If you have storage coverage, the insurer will keep the totaled vehicle for a specified time while you try to retain ownership.
- State laws permit retained salvage titles. Some states like California allow issuing “salvage titles” that let you keep and drive a totaled car under certain conditions.
Even if you retain the car, the vehicle’s title will be branded as “salvage” to indicate its totaled status. You will have to repair the car and pass an inspection to get it roadworthy again.
Retaining salvage vehicles can be complex, so speak with your insurance adjuster if interested. They can explain the specific requirements and restrictions in California.
How Insurance Check Distribution Works in Common Accident Scenarios
To better understand who gets paid when a car is totaled, let’s look at some examples based on different accident situations:
At-Fault Accident
Alex was driving negligently and totaled Bob’s car.
- Bob owned the car outright with no lien.
- Alex was fully at fault for the accident.
- Bob’s car was worth $8,000 before the crash.
- The insurance company totals Bob’s car and cuts him a check for $8,000 (the ACV).
In this case, the insurance payment goes directly to Bob since he owned the car free and clear. If Bob’s car had an outstanding loan balance, the check would be issued to both Bob and his lender.
Uninsured Motorist Total Loss
Charlie hits Diane’s car while driving with no insurance. Diane’s vehicle is totaled.
- Diane owned the car outright.
- Charlie was at fault but had no insurance.
- Diane carried uninsured motorist coverage.
- Diane’s insurer pays her the ACV of her totaled car.
With an uninsured at-fault driver, Diane has to go through her own insurance policy. Her uninsured motorist coverage allows her insurer to pay the damages.
No-Fault Accident
Ed and Fran are involved in a no-fault fender bender that totals both vehicles.
- Ed financed his car through a loan.
- Fran leased her car.
- Both filed claims under their own collision policies.
For both Ed and Fran, the insurance checks will be issued to them AND their respective lender/leasing company. Without one party being at fault, they each claim through their own collision coverage.
Underinsured Driver
Gary is hit by Henry, who only carries the minimum 25/50/25 liability insurance limits in California. Gary’s car is totaled.
- Gary’s vehicle is worth $50,000.
- Henry’s policy limit for property damage is $25,000.
- Gary has underinsured motorist coverage.
Henry’s liability pays the $25,000 limit. Gary’s UIM pays the remaining $25,000 loss. The total $50,000 settlement check is made payable to Gary and his lender.
Having UIM coverage helps reimburse you when an at-fault driver’s policy pays less than your actual losses.
How to Maximize Your Total Loss Settlement
While you may not control who receives the insurance check, you can take steps to maximize the payout amount:
- Provide documentation – Give your adjuster proof of recent repairs, new parts, upgrades, professional detailing, and other expenses that increase your vehicle’s worth.
- Negotiate – Don’t automatically accept the initial settlement offer. Dispute a lowball appraisal with comparable vehicle ads and dealer prices proving higher value.
- Claim tax savings – In California, total loss victims can deduct a portion of the accident settlement amount from their state taxes.
- Review your policy – Make sure you have the right coverages like new car replacement, gap insurance, and storage coverage in case of a total loss.
- Consult an attorney – An experienced car accident lawyer can advocate for proper valuation and help recover every benefit you’re entitled to.
Getting competent legal help ensures you are fully compensated both for the actual value of your vehicle as well as any additional available benefits under California law.
What if the Insurance Check Doesn’t Pay Off My Loan?
There are a few options if the insurance check leaves you still owing money on a totaled car:
- Use the gap insurance payout – Gap insurance covers the difference between the ACV and the remaining loan balance. Make sure you purchase this optional policy when financing the car.
- Tap into savings – You may need to pull from your emergency fund or other savings to cover the leftover loan amount.
- Take a personal loan – Banks and credit unions may offer personal loans at lower interest rates than your car financing to pay off the balance.
- Voluntarily repossess – You can voluntarily let the lender repossess the totaled car instead of continuing payments. This severely damages your credit, though.
- Negotiate with the lender – Ask the financing company to waive the deficit balance or pursue the at-fault driver through subrogation.
- File a lawsuit – For serious accidents, an attorney can pursue additional damages beyond the car value through personal injury claims.
Being upside down on your car loan after a total loss wreck can create financial hardship. Consult with experienced legal counsel to look at all options to recover the full amount you are owed.
How an Experienced Personal Injury Attorney Can Help With Your Car Accident
An experienced San Diego car accident attorney can help if your vehicle is totaled in an accident. They will deal with the insurance negotiations so you can focus on recovering from injuries and getting back on the road.
Pasternack Injury Law Group will fight to help you recover a full and fair settlement in as little time as possible. Contact their team for dedicated legal representation today.
