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If your vehicle is totaled in a covered accident, having total loss car insurance on your policy might help you replace it. Total loss car insurance is not a policy. Instead, it refers to a collection of coverage options that will cover your vehicle if it is damaged, regardless of responsibility. If your car is declared a total loss in a claim, both comprehensive and collision coverage may give total loss protection. Understanding what a total loss is, how it is decided, THE THRESHOLD, and the value it can bring can assist you in determining whether total loss car insurance coverage is right for you.

What Is Total Loss Car Insurance?

If you are involved in an accident and the cost of repairing your vehicle exceeds its actual cash value (ACV), your car insurance provider will declare it a total loss. If it cannot be fixed at all, it is a total loss.

Total loss car insurance means you have the necessary coverages to assist you in purchasing a new vehicle if yours is totaled. This usually means that your policy will include collision and comprehensive insurance.

If your car is totaled and you have the appropriate insurance, your insurer will pay you a settlement. They’ll sometimes take the car and sell it to a business to be fixed or rebuilt. The car will then be issued a salvage title, informing potential buyers that it has experienced considerable damage.

There are two main ways to determine when a car is a total loss:

  • Total Loss Threshold: The total loss threshold is reached when a vehicle’s total loss value reaches a certain proportion of the car’s market value. Each state has its own total loss threshold, which could be a percentage of the total loss formula.
  • Total Loss Formula (TLF): The total loss formula is the vehicle’s fair market value less its salvage value. If the repair expenses equal to or exceed the TLF value, the insurance may declare the car a total loss.

Total Loss Claims and Actual Monetary Value

To receive an insurance payout for a totaled car, your policy must include either property damage liability (PD) or comprehensive or collision insurance.

Every state requires PD, but the only method to collect a payout is to file a claim against another driver’s PD. In order for you to receive compensation from PD, the other motorist must also have been negligent in the accident.

The simplest and most certain way to receive recompense for a total loss is through your own insurance carrier, which is possible with collision insurance. It makes no difference whether you were at fault in a collision claim; nonetheless, you must pay your deductible before the insurer will cover the claim.

Assuming you have this type of coverage in place — and that you are not wounded or otherwise occupied with medical care — your first action after the damage happens is to make a claim with your insurer, just as you would with any other accident. A claims adjuster will check the vehicle to determine the extent of the damage. The total loss determination will be determined here.

If the adjuster concludes that the cost of repairing the car’s damages is greater than its value to them—that is, repairs surpass the car’s actual cash value or ACV—the vehicle is termed a total loss. What constitutes a total loss is not often clear, and how it is assessed differs by jurisdiction. Some jurisdictions have a “total loss threshold” (TLT), which says that damage must surpass a particular percentage of a car’s worth to be considered a total loss.

Total Loss Threshold By State

Approximately half of the states employ the “total loss formula” (TLF), which stipulates that if the sum of the cost of repair plus the salvage value of the car exceeds the car’s ACV, it is considered a total loss.

StateTotal loss threshold
New Hampshire75%
New JerseyTLF
New MexicoTLF
New York75%
North Carolina75%
North Dakota75%
Rhode IslandTLF
South Carolina75%
South DakotaTLF
*Washington, D.C.75%
West Virginia75%
S.C. Mathiesen, Wickert & Lehrer source

In Oklahoma, for example, if you were to crash a Toyota Camry worth $4,800, at least $2,880 (60%) of damage would qualify the car as a total loss. In Colorado, however, the crash would have to cause at least $4,800 in damage to be considered a total loss.

What If Your Car is Considered a Total Loss?

If you agree that your car is a total loss, auto insurance providers like Geico and Progressive will ask you to perform the following:

  • Take off your license plates and other personal stuff.
  • Return the key to the claims adjuster.
  • Please send in any more keys.
  • Fill out the necessary papers
  • If you lease your car, contact the leasing company.

The sooner you complete all of these steps, the quicker and smoother the process will be. Following a total loss designation, the car is normally picked up by your insurance provider, which subsequently tells the DMV that the car has been totaled. The car will be declared “salvage” depending on the state, and any buyers that specialize in salvaging autos can purchase the car from the company.

If you wish to keep the totaled car for repair or sentimental reasons, your company may let it. You’ll get less money if you go that route. Your payout will be the ACV less the salvage value of the car. Even though it has been totaled, a salvage car has some value in its pieces and the possibility to be restored. Customers should also be aware that certain states prohibit drivers from maintaining total loss automobiles, while others require you to obtain a salvage certificate.

How to Dispute a Total Loss

Assume your automobile is declared a total loss and you disagree with the determination. In that instance, the decision can be challenged. When you contest these decisions, you are admitting that your auto insurer undervalued your vehicle and prematurely declared it totaled. Here are the steps you should take to start a dispute:

  • Gather documentation and vehicle details. To demonstrate your vehicle’s genuine market worth, obtain any documents that support this. These may include the original sales receipt as well as notations on the numerous features and add-ons that your car has.
  • Examine current market data on your vehicle. Determine the average current market value of your vehicle’s make and model using a site such as Kelley Blue Book. This tool is great for providing rough estimates. However, it may not be precise enough to refute the total loss assertion on its own. You might acquire an appraisal for accurate figures.
  • Inform the insurer of your position and submit your documentation. Inform your claims adjuster that you believe they devalued your vehicle and that you are contesting the total loss declaration. Give them your documents and notes, as well as the market value information you acquired.
  • Request an evaluation. If your auto insurer is still not satisfied, you can request an in-person appraisal of your vehicle. Without an in-person appraisal, many of these decisions are made based on paperwork and known criteria (such as make and model).
  • Consider taking legal action. If, after following all of the processes outlined above, you and the insurance company still cannot agree on whether your car was fairly valued, you should consider filing a complaint with your state’s insurance authority. This process can be time-consuming and difficult, but it may be worthwhile if you believe your vehicle insurer is operating in bad faith.

What Policies Cover Total Loss Car Insurance?

If you’re looking at policies from the best car insurance companies, you might be asking whether insurance policy types contain total loss coverage. Total loss coverage is provided by two types of motor insurance: comprehensive coverage and collision coverage. If your car is totaled in a non-fault accident, the at-fault driver’s property damage responsibility may cover the total loss. If your vehicle is leased, you might also acquire gap insurance to cover the outstanding loan sum.

What is the Payout for a Total Loss?

The amount of your total loss car insurance payment is determined by the value of your vehicle. When deciding whether to declare the car totaled, your insurance provider is concerned with its actual monetary value. This is the value of the car after any damage or depreciation has been taken into account. If the claims process is successful and all essential elements have been considered, the insurance company will pay you the real cash value.

Is It Possible to Keep a Totaled Car?

Yes, you can keep a totaled vehicle. This is known as salvage. Because the vehicle is now worth less due to the total loss, it is only worth its salvage value, which is significantly less than its market value. You may have to cancel your comprehensive and collision coverage until you can demonstrate that the car has been repaired. Keep in mind that if the vehicle is damaged again, you will not be able to recover the same value.

If you elect to keep your car after a total loss, the insurance company will notify the DMV, which will issue a salvage title. This indicates that the vehicle was declared a total loss and sustained significant damage. Because it might be difficult to insure a salvage car, it may be worthwhile to go through the process of obtaining a rebuilt title if you intend to fix the vehicle and sell or reinsure it.

How Do You Be Compensated for a Total Loss?

ACV, the same criteria used to assess if the car is a total loss, is the amount you’ll be compensated for a total loss. The car’s ACV is derived by its pre-loss market value, less depreciation since the new. Finally, the ACV of your car will be decided by its wear and tear, age, and other variables deemed relevant by your insurer. It is not the same as the price listed on Kelley Blue Book or The majority of significant insurers have their own technique of calculating ACV.

If you agree on a valuation, the insurer will pay you that amount if you own the car. If your car is leased or financed, the compensation is returned to the leasing or financing firm.

So, if you total a leased or financed car, there is a strong chance you still owe money. While the insurance company will reimburse you for the automobile’s worth, it is highly possible that the value has depreciated and does not reflect the value of the car you leased. If you drive a rented vehicle, you should consider getting gap insurance to cover any remaining balance on the lease.

How Long Will Insurance Cover a Rental Car Following a Total Loss?

If your car insurance policy includes rental car reimbursement coverage, your insurer may assist you in covering the costs of a rental car following a total loss. The amount of coverage will be determined by your unique policy and limits.

Total Loss FAQs

Do I need total loss car insurance?

Total loss car insurance, often known as full coverage car insurance, is not required for everyone. If you can afford to replace your car if it is totaled, you may not want additional coverage.

When should I dispute a total loss declaration?

If you disagree with the insurance company’s decision to total your vehicle, you should contest the total loss statement. After the vehicle has been certified totaled, you can do market research to estimate the market worth of your vehicle.

What Effect Does Total Loss Have on Insurance?

Even if you were not at fault in an accident, having your car damaged can raise your car insurance price.


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