What Can You Do If Your Car Is Declared a Total Loss?

Finding out from your insurance company that your car has been totaled is seldom good news, but it can catch you completely off-guard if the damage seemed fixable.

Is your only option to take the payout from your insurer and start shopping for another car? Not by a long shot.

Your vehicle may be so badly damaged in a crash or other mishap that your car insurance company declares it a total loss, but that doesn't mean you have to send it to the salvage yard.

Decisions by claims adjusters can be challenged, but timing is crucial. Be prepared to act fast to keep your car from the scrap heap.

How insurers decide if your car is totaled?

First, it helps to understand why an adjuster chooses to “total” your car. Typically, it’s because the repair costs approach 65 percent of the car's market value. The damage threshold varies by insurer, however, and may be established by state insurance regulators.

CHECK OUT: How a Crash Affects Your Car Insurance Premiums

Adjusters are experts at analyzing the used-car market to determine what your damaged car was worth before the accident, but don’t be too quick to take their word as final. In some cases, vehicles may be more valuable because they were kept in exceptionally good condition.

Just be prepared to prove your case.

Have your maintenance records on hand, as well as detailed lists of the car’s care, says Robert Hunter, insurance director of the Consumer Federation of America.

"You can say 'Look, it has been garaged, here are my service records, it is not an average car,'" Hunter says.

When your totaled car isn't a total loss

Customized vehicles also may deserve a second look from your adjuster.

Modified engines and other special features can add value, but be sure you’ve told your insurer about them before the damage occurs.

"If you soup up the engine and put on different exhausts, if you put in a really expensive radio, you need to let your insurer know," says Pete Moraga, a spokesman for the Insurance Information Network of California.

If these upgrades weren't written into your policy, the insurer is under no obligation to consider their added value, Moraga explains.

Adjuster may also not understand the true value of a specific car.

Karl Brauer, a senior analyst with Kelley Blue Book, says in the early 1990s, his own car -- a 1989 Dodge Shadow -- was badly damaged when it was struck by another vehicle. Although Brauer’s insurance company offered to total the car and pay him $3,000, he pointed out that his car was a limited edition of the Shadow.

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That enabled him to negotiate the payment up to $4,500. He decided to keep the totaled car, repairing it at a cost of $3,000.

"The car had a salvaged title, but I got to pocket $1,500 and I got to keep the car," Brauer says.

Just remember that “loving your car” doesn’t make it more valuable.

Once you determine how much it will cost to make your totaled car roadworthy again, you can make an educated decision about whether to keep and repair it.

A good rule of thumb is that if you have to pay more than the car is worth for repairs, it's probably time to say goodbye.

"If you are attached to the car it can be difficult to let go, but you should be realistic," Brauer says,

You want to keep your totaled car. Now what?

Typically, your insurance company pays you the car's market value, minus any policy deductibles. The company also subtracts the amount of money it would have been paid for the car at a salvage yard.

After that, the car is all yours.

Be aware, though, that totaled cars typically carry salvaged designations on their titles. That may reduce the value when they are resold because many buyers are leery of such vehicles.

It also can be difficult to find car insurance for salvaged vehicles because carriers consider them to be prone to accidents. Damage often doesn't surface until the totaled car is repaired and placed back on the road, Hunter says.

"If a car is knocked out of alignment, it's hard to fix," he says.

Moraga says it's also common for electrical problems to surface after totaled autos have been repaired and returned to the road. This often involves damaged onboard computer systems that have not been properly fixed, he adds.

If your airbag was deployed in a crash and needs replacing be sure to find a reputable company to make the repairs to avoid counterfeit replacements. The National Highway Traffic Safety Administration recommends vehicle owners and repair shops use only certified replacement parts.

Moving forward after your car has been totaled is a daunting task with lots of decisions to made. Try to keep a clear head and think what’s best for you now and in the future.

And remember to always consider the insurance costs of your decisions. For more help with that, do some comparative shopping with free auto insurance quotes

Editor's note: This is an updated version of an article originally published on Dec. 31. 2013.