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If my car is totaled, do I still have to pay insurance?

Here's what you need to know...
  • When your car is totaled, you do not need to pay insurance on it, because it is not drivable
  • If you wish to fix your totaled vehicle, there are steps you can take to get it re-titled and re-insured
  • When choosing a company to insure your vehicle, make sure they are reputable

Losing the vehicle you drive every day to a car accident in which your car is a total loss can play havoc with your routine.

The definition of a total loss as determined by insurance companies is, typically, when the cost of repairing the vehicle insured is more than 80 percent of the cost of the vehicle.

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This percentage may vary by insurance company, but is a good assessment of the costs in most states. To explain in a simple manner:

  • Value of vehicle at time of accident — $20,000
  • Cost of repairs to return vehicle to original condition — $18,000
  • Claim paid — No repairs, but a check for $20,000 less the deductible issued to insured party and the lien-holder

As the owner of the vehicle, you run into difficulty if the amount you still owe on the vehicle is over $20,000. You could still end up making payments on the loan you have incurred until it is paid.

Some insurance companies offer a clause offering guaranteed replacement cost coverage at an additional premium. This replacement cost coverage can ensure that the loan is paid for in the event the vehicle is totaled.

After a Vehicle is Totaled, is Insurance Necessary?

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No, you do not have to pay for insurance on the vehicle once it has been totaled because it is not driveable. If someone intends to purchase the vehicle and restore it for use, they need to obtain a new title with the notation “Salvage Title” on it.

If a vehicle is totaled and the insurance company provides a check paying for it, the vehicle receives a new type of license in most states.

A salvage title is issued and the vehicle sold for parts or salvage to the various entities that purchase this type of vehicle.

Salvage titled vehicles cannot be driven on public roads in most states, but they may be repaired, submitted to the state for a safety inspection, then have the title reissued under a new title.

Circumstances in Which a Vehicle may be Retitled

In some circumstances the vehicle may cost a great deal to repair, but is still drivable:

  • Hail damage to the exterior
  • Body damage that affects looks more than drivability
  • Cosmetic damage and little mechanical damage

It is worth the time to examine the circumstances of the loss and perhaps consult with an attorney about settling the claim with the insurance company.

You may be able to make a deal with the auto repair company to reduce the cost of repairs so it is worth your time and money to repair the vehicle.

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Insuring a Vehicle with a “Rebuild Salvage” Title

If you choose to repair your vehicle after an accident or physical damage in which it has been totaled, there are processes to follow:

  1. Have the vehicle repaired so it is sound mechanically.
  2. Most states have a process by which a new title and VIN number can be issued for the formerly damaged vehicle.
  3. Observe the process and legally title the vehicle.

Purchasing Insurance

The insurance that you previously had on the vehicle has been canceled and is no longer in force since the insurance company has divested themselves of their interest in the automobile.

Get quotations from several insurance companies because many are reluctant to provide insurance for vehicles with “Rebuild Salvage” titles due to the risk of poor workmanship in the rebuilding process.

Choose at least three companies willing to sell this type of insurance and compare costs. You will need to give them:

  • Bodily Injury Liability Limits –sSuggested $100,000 per person/$300,000 per accident
  • Property Damage Liability – $50,000 per accident
  • Medical payments coverage – $5,000 to 10,000 per accident
  • Underinsured/uninsured motorist coverage – $100,000 per person, $300,000 per accident
  • Comprehensive coverage – Fire, vandalism, animal damage, wind, hail, storm, and theft
  • Collision coverage – to protect against damages from collision with another vehicle or into an object

Choose an appropriate deductible, but recognize that the higher the deductible, the less you pay for insurance. Property damage on the vehicle may be difficult and expensive to obtain because of the history of the vehicle.

Details Needed by the Insurance Company

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For rating purposes, the insurance company will need the following:

  1. Make, model, and VIN number for the vehicle
  2. Name, date of birth, and drivers license numbers for each driver
  3. Driving record for drivers as well as the purpose for which the vehicle is used

Choose a Reliable Insurance Company

Go to your state’s insurance website to find insurance companies licensed in your state. This site will give you ratings for insurance companies with regard to the financial ratings as well as the way they handle claims. Other sites that give information about this are:

Examine the possibilities of purchasing your old vehicle as a salvage vehicle, but be cautious about the mechanical condition of the vehicle. This can be a way to save money on vehicles.

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