Car accidents are stressful enough on their own, but it’s even tougher if your car ends up totalled. Suddenly, you’re left without a vehicle, wondering, “What now?” The good news is that your car insurance coverage should step in to help. But how much will car insurance actually pay you for the car? And will the money go directly to you or someone else? Let’s break it down.
What is a total loss?
A total loss, or a “write-off,” usually happens when your car has been seriously damaged, and the repair costs are higher than what the car is actually worth—even after factoring in its salvage value. It can also be declared a total loss if it’s stolen and not recovered or if it has structural damage that just can’t be repaired. In these cases, your insurance company will give you a payout based on the specifics of your policy.
How does my insurer determine if my car is a total loss?
When your car is seriously damaged, insurance appraisers will look at its value right before the accident to determine what’s called the actual cash value (ACV). They consider things like:
- The make, model, trim, and year of your car
- Its estimated condition before the accident, including the interior and other parts
- The car's mileage
- Any extra features or custom equipment
- The current market value for similar cars
Once they figure out the ACV, they’ll review the damage and repair costs. Your car will likely be declared a total loss if:
- The repair costs are more than half of the car’s value
- It has structural damage that can’t be repaired
- The airbags deployed (which often means significant damage and expensive repairs)
How will they calculate the value of my totalled car?
Most insurance companies use a similar process to decide if your car should be written off based on its value and repair costs. Here’s how the actual cash value calculation works:
Actual Cash Value (ACV) – repair costs + salvage value = repair/write-off decision.
If the car's ACV is more than the combined repair and salvage costs, they might go ahead with repairs. But if the car's ACV is less, they’ll probably declare it a total loss. Typically, insurers choose the less expensive route—either covering the repair cost or the car’s cash value.
In some cases, even if repairs are technically cheaper than the car’s value, it might still be considered a write-off. This can happen because parts have gotten more expensive, some older car parts are harder to find, or inflation is driving up costs. If your car is declared a total loss, the insurance company will give you a cash settlement based on the car’s value before the accident, minus your deductible, and they’ll take the salvage. However, if your car is less than two years old and your policy includes a limited depreciation waiver, they’ll pay you to put you back in the same position you were in immediately prior to the loss.
If your insurer decides to cover the repairs, they’ll typically work with shops they’ve partnered with. You can choose another shop, but just know that the insurer only guarantees the work done at one of their preferred shops. If you decide to go with a different shop, make sure to get a written estimate for parts and labour and share it with your insurer to confirm it’s within the amount they’re willing to cover.
What coverage do I need for a total loss?
If the total loss happened because of a car accident, your insurer will also need to figure out who was at fault. If you weren’t at fault, your payout may be covered under direct compensation-property damage (this can vary by province). But if you were at fault, you’ll need collision coverage to receive compensation. If the total loss occurred due to a non-collision-related event, you'd need to carry comprehensive coverage. It can also be helpful to have loss of use coverage and GAP insurance. We will explore each coverage in detail below:
Direct compensation-property damage coverage
If you’re in an accident and the other driver is found at fault, their insurance will cover the repairs or replacement for your car. That is unless you live in a no-fault insurance province. In that case, your direct compensation-property damage coverage would kick in to help streamline your claims process so you're only working with your own insurance company instead of waiting on the other driver's insurance.
Collision coverage
If you were in a collision and you’re found at fault—whether it’s hitting another vehicle or a single-vehicle collision where you hit a stationary object—you’ll need collision coverage for your insurance to cover the cost of repairs or replacement.
Comprehensive coverage
If your car gets damaged in other ways—like from fire, bad weather, vandalism, theft, or even hitting a large animal—you’ll need to carry comprehensive coverage to help cover those costs.
Loss of use coverage
Loss of use coverage, sometimes called temporary vehicle replacement coverage, helps cover transportation costs if your car is being repaired or replaced after damage or a loss. While your car is out of commission, this coverage can help pay for things like public transit, taxis, or even a rental car.
GAP coverage
This coverage is essential for those who are leasing or financing their new car. GAP stands for Guaranteed Auto Protection, and it’s helpful if you owe more on your car than it’s currently worth. With this, your insurer covers the "gap" between what you still owe on your car loan and the car’s actual cash value if it’s totalled or lost. With GAP insurance, you won’t actually see any money yourself if your car is totalled, as the payout goes directly to the lender. This coverage just means you won’t be stuck making payments on a car you no longer have.
Filing an insurance claim for a totalled car
If your car is totalled, you’ll need to file a claim with your insurance provider. The process might feel overwhelming, but BrokerLink is here to simplify it. If you have any questions along the way, don’t hesitate to reach out to one of our licensed insurance professionals. Here are the steps to file an insurance claim for a totaled car:
Exchange information
If your accident involved another driver, once everyone is safe, start by exchanging insurance information. Ask for their insurance and registration details, including their:
- Insurance company
- Policy number
- Driver’s licence
It’s also helpful to note or snap a photo of their licence plate, as well as the make and model of their car. Now is also a great time to gather other evidence for your claim, like photos, videos, and eyewitness statements.
Report the accident
Next, contact your insurance company to report the accident as soon as possible. They’ll ask you some questions about what happened and guide you on the forms you’ll need, which type of coverage to claim, and how long the process may take.
If you estimate that the damage is over $2,000, or if anyone was injured in the car accident, you must file a police report. Be sure to get a copy of this report along with the attending officer's name and badge number for your insurance claim.
Call for a tow if your car can’t be driven
If your car is undriveable, arrange for a tow. Depending on your coverage, this might be covered by your insurance, especially if you have roadside assistance. Otherwise, be ready for an out-of-pocket cost.
Submit your insurance claim
The final step is to gather all required documents and formally submit your claim. This may include your bill of sale, proof of ownership, repair receipts, and any loan or leasing documents if your car is financed. Once everything is in order, submit your claim, and you’re all set!
How will a total loss claim affect my insurance premium?
Your insurance premiums might go up, but it mostly depends on whether you were at fault for the accident. One common reason for a premium increase is being involved in an at-fault collision. Luckily, many insurers offer accident forgiveness, which can prevent your rate from rising after your first at-fault accident. If you’re not at fault, the claim shouldn't affect your premium.
When will I be paid out after my car has been deemed a total loss?
If your car is totalled due to a covered peril, it might take a couple of weeks to get your payment, depending on how long it takes to process your claim. Your insurance advisor will guide you through each step of the claims process and help determine the amount of coverage for your claim.
After you reach a settlement with your insurer, you’ll get a cheque for the agreed vehicle write-off amount, minus your deductible. Once the actual cash value of your totalled car is determined, you can usually expect the payout within a few days. However, there are two situations where you might not receive the payment directly:
- If you’re leasing
- If you have a car loan
In these cases, the insurance company pays off what you owe directly to the lender. If there’s any amount left after that, it goes to you. The same process applies if you’re leasing the vehicle. Keep in mind that after insurance pays off the lender, if you still owe any money, you will be obligated to cover the remaining balance unless you have GAP insurance.
For more details, your adjuster can let you know when to expect payment and can also tell you how long the insurance will cover a rental car if you have one.
Can I negotiate my settlement payout after a total loss?
Many drivers don’t realize they can—and should—negotiate a total loss settlement with their insurance company. Remember, insurance companies are businesses that aim to minimize costs, but you have the right to challenge their assessment if you feel it’s unfair. Most insurers even offer an arbitration process for disputes. Just make sure not to sign anything or accept any money if you disagree with their valuation.
If you want to dispute the offer, start by learning as much as possible about their claims process and how they determined the settlement amount. You can also do your own research by checking the actual cash value of your car in your area and comparing it to their offer. Don’t hesitate to ask an insurance advisor for guidance—they can even help negotiate with your insurer. Once you’ve gathered your information, talk to your insurance representative and present a counteroffer. You might need to go back and forth a few times, but it can help you reach a fair settlement.
What to do if your car is deemed a total loss
If your insurance company decides your car is a total loss, you have a few options. First, if you believe your car is worth more than the appraiser’s estimate, you can negotiate the payout. As we mentioned, to make a strong case, gather evidence like local prices for similar models and highlight any upgrades, modifications, or luxury features your car has.
If your totalled car is labelled as “salvage” (meaning it has no structural damage), you might have the option to keep it in the settlement. Just remember, if you want to drive it again, you’ll have to cover repair costs yourself. On the other hand, if your car is marked “irreparable,” you won’t be allowed to fix or drive it. However, you could still sell it for parts to recover some money.
As you can see, you have choices beyond simply accepting the payout. In some cases, though, the best move may be to take the insurance payout and put it toward a new vehicle.
When do I get my new vehicle after a total loss insurance claim?
It’s up to you to find and buy a new car with the settlement money. Whether you spend more or less than your settlement amount is entirely up to you. If you’re considering a used car, remember that some factors—like modifications—could affect your insurance coverage. Before you buy a new car, it's always a good idea to talk to your insurance advisor or broker to understand any potential insurance implications.
Contact BrokerLink today
If you want to learn more about how insurance companies decide when a car is a total loss or what your options are afterward, reach out to BrokerLink. We’re insurance experts who can guide you through the entire process, from filing a total loss claim to understanding what to do when a settlement is offered.
As a full-service car insurance brokerage, we can also help you review your coverage to make sure you’re well-protected before you ever face a situation like this. You can reach us by phone, email, or in person at one of our locations across Canada.
However you choose to connect, a BrokerLink advisor will be happy to help. And don’t forget to check out our free online quote tool—it provides competitive quotes in just a few minutes.
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FAQs one whether insurance provides compensation for a totaled car
What happens when a car is written off on finance?
If you financed your car and it’s declared a total loss, the actual cash value (ACV) will go directly to the finance company or dealer from which you took the loan. If the payout doesn’t fully cover what you still owe, you’ll need to pay off the remaining balance yourself.
What does a write-off mean for a car?
Can I keep my car after insurance declares it a total loss?
Yes, in most cases, you can keep your car after it’s been declared a total loss. You can negotiate with the insurance company to keep it, even though it’s considered a write-off. If you choose to do this, your payout will be the actual cash value of the car minus your deductible and the amount it would have sold for as salvage.
What is replacement car insurance?
Replacement car insurance, or gap insurance, helps if your vehicle is badly damaged in an accident and declared a total loss, meaning the repair costs are higher than the car’s value. In this case, the insurance company gives you a payout to help with replacing the car. Car dealerships or lenders often offer this coverage to drivers who lease or finance their vehicles. It’s usually added to your lease or payment plan rather than being part of your standard auto insurance policy.
How can side-impact collisions lead to injury?
Side-impact collisions, also called T-bone accidents, can be very dangerous. In these crashes, your body is often jerked sharply from side to side or backward, which can lead to serious injuries. Since car sides offer less protection than the front and back, passengers on the side that get hit are at a higher risk for severe injuries.
Besides common injuries like whiplash or head trauma, side-impact collisions can also result in broken bones or cuts, especially to the arms, legs, and shoulders near the impact. Other potential injuries include damage to the hips, pelvis, abdomen, chest, and spine.
Will a single-vehicle collision affect auto insurance?
Any kind of collision can affect your insurance rates, and at-fault accidents almost always lead to an increase. Since single-vehicle accidents are typically considered at-fault, you should expect your premium to go up if you’ve recently been in one.
If you have any questions, contact one of our local branches.
