When is a car considered totaled?

A car is generally considered totaled when the cost to repair the car exceeds the value of the car. Depending on your coverage, your auto insurance company may reimburse you for the current market value of your vehicle.

In other cases, the insurer determines whether a vehicle is considered a total loss.

Comprehensive coverage and collision coverage help pay to replace a totaled vehicle. These two separate coverages are typically required on your car insurance policy if you're leasing or financing your vehicle. If your car is paid off, they're optional. But, if your vehicle is totaled and you don't have comprehensive or collision coverage, you may have to pay out of pocket to buy a replacement vehicle.

If you're involved in a car accident, there are a few basic steps to follow before and after your vehicle is considered totaled:

• File an insurance claim
• Your insurer will determine whether the vehicle is a total loss, based on repair costs.
• Your insurer will issue payment for the actual cash value of the totaled vehicle, minus your deductible on your comprehensive or collision coverage.

Insurers use several factors to determine your vehicle’s actual cash value (ACV) – which is how much your vehicle is worth minus how much it’s depreciated. To determine your car's ACV, insurers typically use a number of factors, including its age, condition, mileage and resale value, plus the selling price of similar vehicles in your area.

If your vehicle is financed or leased, you’re still responsible for paying off the loan, says U.S. News. A claim payout will likely have to go toward covering the costs.

You may still owe your lender more for the car than the insurance payment you receive. In that case, you’re responsible for paying the remaining balance on the car lease or loan.

For instance, suppose you owe $15,000 on your car loan, but your vehicle's value has depreciated to $13,000 when it's totaled. If you have collision coverage, your insurer may reimburse you for the actual cash value of your car — in this case, $13,000. You would have to pay your lender that amount, plus the remaining $2,000 out of your own pocket.

Adding loan or lease gap coverage to your car insurance policy is one way to help protect against paying a lender out of pocket for a totaled vehicle. In fact, most lenders require it. This covers the difference between what you owe on your vehicle and it’s ACV at the time of the accident.

If your car is totaled and the other driver’s at fault, their property damage liability insurance may reimburse you for your vehicle’s ACV. Sometimes it takes a while to determine fault, and your insurer may pay for your damaged car in the meantime – if you have collision coverage.

Some states, however, have no-fault laws, which require you to file a claim with your own insurer no matter who’s at fault, according to the Insurance Information Institute (III). If your vehicle is totaled in a no-fault state, collision coverage may step in to help replace your vehicle.

If your vehicle's airbags deploy in a car accident, that doesn’t necessarily mean your car is a total loss. Your insurer’s will assess the situation and determine if the cost of replacing the airbags and repairing your vehicle would exceed its actual cash value. If the cost of repairs is less than the value of your car, your vehicle will likely not be declared a total loss.