Can an Insurance Company Force you to Total your Car?

Some questions, answered 

• Can your insurer force you to total your car?

• Where can I find the total loss rules for my state?

• Can I repair the car myself, even if the insurance company doesn’t want to?

Once you hear metal colliding with metal, it's hard to unhear it. If you've ever been in a serious car accident, that crunching metal noise can generate all kinds of concern. You're instantly thinking about physical injuries, damage to your car, and insurance claims. And if the damage to your car is extensive, you also have to worry about your insurer refusing to pay for the repairs. 

Depending on the repair costs relative to the car's value, your car insurer may choose to pay you off with a check instead of fixing your car. This is what happens when your insurance adjuster declares your car a total loss. Instead of getting your car repaired, you get a payment for the car's pre-accident market value, less your deductible. Unless you have a car loan. In that case, the check goes to your lender.

You may not like the total loss declaration for a couple reasons. The payout may be less than what you need to replace the car, or you may be simply attached to the car you had. Either way, you're right to wonder if the insurer can force you to accept this outcome.

Once you hear metal colliding with metal, it's hard to unhear it. If you've ever been in a serious car accident, that crunching metal noise can generate all kinds of worry. You're instantly thinking about physical injuries, damage to your car, and insurance claims. And if the damage to your car is extensive, you also have to worry about your insurer refusing to pay for the repairs. 

Depending on the repair costs relative to the car's value, your car insurer may choose to pay you off with a check instead of fixing your car. This is what happens when your insurance adjuster declares your car a total loss. Instead of getting your car repaired, you get a payment for the car's pre-accident market value, less your deductible. Unless you have a car loan. In that case, the check goes to your lender.

You may not like the total loss declaration for a couple reasons. The payout may be less than what you need to replace the car, or you may be simply attached to the car you had. Either way, you're right to wonder if the insurer can force you to accept this outcome.  

Can your insurer force you to total your car? 

The unfortunate answer is yes, your insurance company can force you to total the car. Arguing, withholding permission, or complaining on social media won't help. 

State law supports the insurer's ability to declare the car a total loss without your permission. The state either defines what constitutes a total loss or it allows the insurer to make this determination by its own formula. Sadly, no state gives the vehicle's owner any right to block or change the insurer's decision. 

Why cars get totaled 

Depending on the state, insurers will use a total loss threshold or a total loss formula (TLF) to decide whether the car should be repaired. 

Total loss threshold

A total loss threshold, also called loss ratio, is a maximum value for repair costs divided by the car's actual cash value (ACV). Note that ACV is not what you paid for the car -- it's the amount you could sell the car for if it hadn't been damaged. 

Total loss thresholds range from 60% (in Oklahoma) to 100% (in Colorado).¹ Most states use 70% or 75%. 

Here's how the math works on loss ratios. Say your car was worth $10,000 before the accident. The repairs estimate comes in at $7,000, which equates to a loss ratio of 70%. In Oklahoma, the insurer would total this car because the loss ratio is higher than 60%. In Colorado, the insurer would pay to have the car repaired.

Total loss formula 

The total loss formula is more straightforward. Under a TLF, the insurer will total the car if the estimated repair costs plus the car's salvage value exceed the car's ACV. 

Insurers use the TLF if the state requires it or if the state doesn't define a total loss threshold. 

What you can do about a total loss decision 

If you want to fight the insurance company on the total loss declaration, you can. The insurer has no obligation to change the decision, but you could put together a good argument for a different outcome. Use the three steps below to build your case.

Step 1. Know the laws in your state 

Your first order of business is to learn the total loss laws in your state. You need to know whether your insurer is using a loss ratio or the TLF. You can find state-by-state total loss rules here. 

Step 2. Research your car's ACV

Your car's market value is a key variable in the loss ratio and the TLF. If your insurer has under-valued your vehicle, that could lead to an incorrect total loss decision. 

There are many resources online that will estimate your car's value, including: 

• Kelley Blue Book 

• Carfax

• Edmunds

• Consumer Reports 

Your insurance company, of course, has access to all these plus additional data that's not available online. 

What your insurance company may not know about is any upgrades or special equipment that you had installed on the car. If the car had any big "value adds," document them with pictures and receipts. You may need to retain a professional auto appraiser to quantify the value of those extra features. 

Once you know your car's ACV, estimate its salvage value. A guideline to use for salvage value is 25% of the car's ACV.²

Step 3. Collect more repair estimates 

The estimated cost of repairs is also an important number in the total loss decision. You can validate the insurer's repair estimate by collecting quotes from competing auto shops. This might be more challenging than it sounds since you'll likely have to tow the car to different facilities. Still, it may be worth it if you suspect the first repair estimate is too high. 

Make your case 

Once you know your car's ACV, salvage value, and estimated repair costs, follow the state formula to make your own total loss determination. You may end up agreeing with your insurer. In that case, at least you will agree that the total loss decision is justified. 

If your numbers indicate the car should not be a total loss, call your insurance adjuster. Present your data as thoughtfully, thoroughly, and professionally as you can. Your case will be strongest if you have a professional appraisal on the car plus multiple repair estimates. 

You can buy the car back 

If your insurer won't budge on the total loss declaration, you have one more option. You can buy the car back at its salvage value and manage the repairs yourself. This is not a straightforward process, however. 

The car will have a salvage or junk tile, which makes it illegal to drive on public roads. Before you can insure or drive the car legally, you'd have to repair it, have it inspected, and then apply for a rebuilt title. In some states, a certified rebuilder must complete those repairs. In all states, you'd have to document the repairs made and the parts used. 

Moving on from the accident 

Car accidents are stressful -- especially when you're at risk of losing your car to an insurance adjuster's decision. You can make a case to change the adjuster's mind, but it's unlikely to change the outcome. You may be better off focusing on recovering from any injuries, finding a new car to drive, and making sure your next car is appropriately insured.