When does a car insurance company total a car?

Car insurance companies total a car when it would be more expensive to repair than replace it. Your total loss threshold could be as low as 65%, but it varies between companies.

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UPDATED: May 19, 2020

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Here's what you need to know...
  • The rules and requirements for insurance companies declaring total losses vary from state to state
  • Typically, the damage ratio must be over a certain percentage before the insurer has the right to declare a vehicle totaled
  • If your car is totaled, you have options for how to proceed with your insurance carrier

When you are involved in an accident, it is easy to assume that your car needs to be crushed like a recycled aluminum can before the vehicle is declared a total loss.

While a majority of policyholders who are not well-versed on the terms and conditions of auto insurance policies assume that a vehicle must sustain major damage to be declared totaled, the factors that lead to a total loss vary depending on where you live.

One vehicle that sustains major front-end damage may be considered repairable while another that suffers some deep scratches and dents to the fender is not.

Read this guide and get familiar with the details before you ever need to file a physical damage claim.

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What is a total loss?

A total loss, in the auto insurance industry, is a declaration by the auto insurance provider stating that the cost to repair the damaged vehicle exceeds the value of the policy.

Some vehicles are declared total losses when the car cannot be repaired, and others are declared total losses when the repair costs for the damage are higher than the Actual Cash Value of the vehicle or Total Loss Threshold in the state.

This is why some vehicles are declared a write-off even when they are operable and repairs are possible.

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How damaged does a car need to be before it is declared a total loss?

The amount of damage that must be sustained in an accident to lead to a total loss decision depends entirely on the value of the vehicle and the Total Loss Threshold in the state.

Newer cars that retain their value must be seriously damaged to become write-offs, but older vehicles that do not have much value can be totaled for even the most minor damage.

Here is some valuable information that you should be aware of if you want to avoid the stress associated with a total loss claim:

Know the Total Loss Threshold

Most policyholders have been advised that their car will only be totaled when the cost of damage repair exceeds the fair market value of the car.

While this is how the basic total loss valuation is calculated, some states have their own unique laws concerning what the ratio of damage to value needs to be before the car can be written off.

This ratio is referred to as the Total Loss Threshold.

The Total Loss Threshold, or TLT, says that the damage ratio must be over a certain percentage before the insurer has the right to declare the repairs impractical and uneconomical.

While there are still some insurance companies that have a TLT of 100%, the threshold ratio can be as low as 65 percent in states like Nevada.

You will need to check with your state’s department of insurance to see what the state dictates as sufficient damage to issue a salvage title.

Know the Reasonable Value of Your Vehicle

If you are not familiar with how vehicles are valued by your insurer, you might just accept the first settlement offer that you receive.

What your insurance doesn’t tell you is that the wrong vehicle valuation can lead to a total loss when the car in question does not need to be totaled.

This is why it is critical that you learn the claims valuation process.

To determine the fair market value of a vehicle after a loss, insurance claims adjusters will use:

  • Car value books
  • Computerized vendor quotes
  • Recent market sales in the area

Each of these mechanisms can affect how the car will be valued and how much damage will lead to a write-off.

— Research the Value of Your Car

If the adjuster does not consider the condition of the car, aftermarket additions, low mileage, or other factors that might increase value, you must question the evaluation.

You have the right to negotiate value if you feel like the determination is not accurate or is unfair.

In fact, anyone dealing with a total loss should do some research to find out how much the car was worth before the accident prior to signing any settlement documents.

A claims representative will never tell you this, but you do have the right to provide the insurer with price quotes for similar replacement cars at dealerships in your area.

You can argue that the settlement offered is not enough to purchase the same car. You may be able to ask the insurer to show you where there is a professional dealer selling the vehicle for the price being offered.

You may be able to ask the insurer to show you where there is a professional dealer selling the vehicle for the price being offered. If the agent is not willing to work with you, you do have the right to go to mediation and then to arbitration.

What are your rights following a total loss?

If you agree that your vehicle should be totaled, you need to know your rights after a total loss settlement has been offered. You have the right to either keep the vehicle or sign the vehicle over to the insurer for a total loss check.

If you decide that you would like to keep your vehicle and repair it on your own, the insurer will cut you a check for the value of the vehicle minus the vehicle’s salvage value.

If, however, you have decided that you do not want to deal with repairs, you can sign over the title to the insurer for auction and receive a check for the entire fair market value that has been agreed upon.

The value will include sales tax and title fees.

The insurer will then decide if they will scrap the vehicle or sell it at auction to get back the salvage value.

Your insurance company should look out for your best interests when settling a claim. If you are not happy with the service you have received, it might be time to begin shopping for a new policy with a more reputable insurer.

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