Getting caught up in a car accident can put a pall on your day. When you suffer property damage and your car gets totaled, it can put a pall on your entire year.


Under Colorado law, if you are involved in a car accident that occurred without your fault, you have the right to claim compensation. Even if you were partially at fault for the accident, it is still possible to obtain compensation, although in proportion to your level of fault.

But the sticky point in getting the compensation you deserve is when the insurance company says your car is too far gone to repair. In such a situation, the insurance company will only pay you what they think the car was worth, immediately before the accident. This can be pretty bad news if you are still paying a lot finance on the car.

You should understand that you have rights that you can exert in those situations. It is possible for you to contest the decision of the insurance company or their valuation of your car. With top notch legal representation such as that we provide at Malman Law Firm, you can assert your rights to a better resolution.

Our over 40 years’ experience in handling car accident and personal injury cases has helped us build a great network that you will have at your disposal as our client. We will explain what your rights are in the event of this situation and we will help you understand what options you have after the insurance company’s decision.

In this article, we provide you a breakdown of what it means for your car to be totaled and when your car will be totaled. You will also understand what happens when your car is declared a total loss and what you can do about it.

When is a vehicle considered to be a total loss?

As far as car insurance companies are concerned, a totaled vehicle is a total loss. It is considered to be beyond the point of repair. So, instead of paying you what it will cost to repair your vehicle, the insurance company will rather pay the value of the car just before the accident.

The value that the insurance company pays is also called the fair market value or the actual car value (ACV). The insurer in question may be either yours or the at-fault party’s insurer, depending on the facts of the accident.

In many states, there are rules to determine when a car should be considered a total loss. Generally, your insurer will consider your car a total loss when the cost of repairing it exceeds 80% of its value.

This means that if your car was worth $10,000 on the day of your accident, the company will not pay for repairs over $8,000. Rather than repair your car, they will pay you the $10,000 as compensation for the loss of your car. Usually, they will then auction off your car.

Ordinarily, the insurer is required to offer a cash settlement based on the actual cost of another comparable vehicle. Whatever amount they offer you should include the value of all applicable taxes and fees you would normally pay on the vehicle. They can also decide to offer you a comparable vehicle to your own car as a replacement. This includes the payment of applicable taxes and fees.

But why does it matter whether your car is totaled anyway?

Why does it matter whether your car is totaled or not?

A totaled vehicle is basically gone. The declaration by the insurance company means that you will not have another vehicle until you dip your hand into your pocket and buy another one.

If you want, you can purchase the car from the insurance company, especially if you really cannot afford another car immediately. Be careful with this though. The law requires the insurer to immediately change the title of the vehicle to a “salvage title” once they declare it a total loss. Before this can be reversed, the vehicle must be operable to all relevant standards.

Besides, if you still owe finance on your car when it is totaled, you will need to close that chapter first.

What happens if you still owe on your car when it is totaled?

If you don’t owe too much on your car at the time it is totaled, this won’t be much of a problem. What happens in this situation is the insurance company will make out a check to the ACV of the car and send it to your finance company.

The is because the fact that your car got totaled has no effect on the debt you owe the finance company. You are expected to keep making payments on the vehicle regardless. If you fail to continue payments, the car can get repossessed. Apart from this, the amount you owe can be reported to the credit bureaus. This will hurt your credit and harm your chances of getting cheap finance.

The finance company will deduct what you still owe on the car and send you a check for the difference. This leaves you with a substantial amount in your pocket to start over and possibly look at some vehicle finance options.

You can check to ensure that that the insurance company’s valuation of your car tallies with the fair market value. Sources like NADA Car Guides and Kelley Blue Book can guide you on the accepted market ranges for most car models even going back a few decades.

If the insurance company decided to give you a replacement vehicle, you can work something out with the finance company. This would allow you continue making your old payments on the new vehicle.

But it’s a different story entirely if you are still early in your finance agreement. It means that you will be looking to pay a substantial sum of the settlement to defray whatever you still owe on the car.

This can leave you with very little after the insurance company’s settlement. Even worse, it can leave you still owing the finance company.

What if the payment from your insurer is not enough to pay off your finance?

The short and simple of it is: if your car settlement cannot pay off your finance debt, you are responsible for the difference. After the settlement from the insurer is exhausted, the difference will be collectible from your personal account. This is a common scenario mostly due to how quickly a car depreciates.

If you have Guaranteed Asset Protection (GAP) though, you will not have to be personally responsible for the difference. GAP basically does what it sounds like. It pays the difference between the insurance company’s settlement and what you still owe the finance company.

It is usually offered as an add-on when you take out finance in the first place. You would need to find your finance documents and carefully check to know if you have GAP. If you can’t find anything, you can call the insurance company, just to be sure.

Get in touch with Colorado’s best car accident lawyers

Discovering that your car settlement will leave you owing your finance company is never great news. But there’s a lot you can do to remedy the situation. Remember you do not have to be alone all through the struggle.

At Malman Law Firm, we will do everything possible to ensure that you get fair compensation. We will also help you explore every single option that will give you an advantage.

Call us on (303) 733-7900 or click here to start a conversation today.


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