A total loss typically means that the cost to fix the vehicle would be greater than the actual cash value of the vehicle before damage occurred. If repair costs are excessive, an insurer may consider it impractical to repair the car, declaring it a total loss.
How do insurance companies determine total loss?
Insurance companies typically determine whether a vehicle is a total loss by comparing the estimated repair costs and the salvage value to its market value before the accident occurred. The vehicle is likely considered a total loss if those costs are the same or higher than the market value.
How insurance companies calculate total loss
Insurance companies may calculate a total loss by comparing a vehicle’s ACV, which is the market value before damage occurred, with repair cost estimates.
The total loss threshold (TLT) is a state-by-state determination of the car’s ACV percentage that may help declare a car a total loss. Some states use a total loss formula (TLF) instead, which determines a total loss when the vehicle’s repair costs meet or exceed the pre-damage value.
For example, if a state has a 70% threshold for a car with an ACV of $10,000, $8,000 of repair costs would constitute a total loss.
What happens when your car is declared a total loss?
After an accident, the policyholder can file a claim with their car insurance company, which may have an adjuster inspect the vehicle to assess the ACV and repair estimates. The insurer may offer settlement options for the policyholder; in some instances, the insurer may take possession of your car.
What if you still owe money on your car
If your car is declared a total loss and you still owe the loan or lease, your insurer may determine the ACV, but you may still be responsible for the remaining balance on your loan or lease, depending on your lender’s terms.
The role of gap insurance
Guaranteed asset protection (GAP) may help cover the difference between what an insurance company might pay for a totaled vehicle and the amount the policyholder owes on the loan or lease.
Learn about your policy options
Infinity Insurance Agency, Inc. (IIA) works with 20+ auto insurance carriers that offer different vehicle coverage options. Get in touch with one of our Spanish bilingual agents by calling 1-855-478-3705 or get a free quote online today.