What happens when the car is totaled?

The short answer

A total loss pays what the car was worth, minus your deductible, not what you still owe on it. On a newer car with a loan, the difference can be thousands of dollars.

The policy pays what the car was worth the day before, not what you still owe on it. On a newer car with a loan, those two numbers can be thousands of dollars apart.

Don't know a word? Press any purple word to see what it means. They're all listed at the bottom of the page.

Deductibles, and how to pick one

Your share of a collision or comprehensive claim.

A higher deductibleLowers the premium.

But you pay it firstThe Insurance Information Institute’s advice: choose one you could actually pay tomorrow out of savings.

A rule of thumb

An older car

Their rule of thumb: when the car is worth less than about ten times what you pay for collision and comprehensive each year, it may be time to consider dropping those two parts. Liability is legally required in most states.

The total-loss surprise

When the car is written off.

23%of 2025 claims ended with the car written off, a record shareCCC, 2026

When that happens, the policy pays the car’s value, minus your deductible. If your loan is bigger than that, the lender still wants the difference.

Try it

Do you owe more than the car is worth?

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Left on the loan

$28,000

What the car is worth today

$22,000

What a total loss paysWhat you still owe

Where gap insurance fits

From the Consumer Financial Protection Bureau.

What it paysThe difference between what you owe and what the insurer pays on a total loss.
Usually optionalIf a lender says it is required, its cost has to be included in the loan’s APR.
Rolled into the loanYou pay interest on it.
Only for a whileYou only need it while you owe more than the car is worth.

Worth comparing

Your own car insurer may sell gap cover too.

Remember this

If you owe more than the car is worth, gap insurance is the part that pays the difference.

Words on this page

Collision: Pays to fix your own car after it hits something or rolls over, whoever was at fault.
Comprehensive: Pays for damage to your own car that is not a crash: theft, hail, flood, fire or hitting a deer.
Deductible: What you pay yourself on a claim before the insurer pays the rest. With a $500 deductible, the first $500 is yours.
Premium: What you pay for the policy, whether you make a claim or not. It can be paid monthly, every six months or once a year.
Total loss: When repairs would cost more than the car is worth, so the insurer pays the car's value instead of fixing it.

Next — Step 6 of 6: How do I lower it without losing coverage? →