Jessica Sautter is a Content Writer for with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Sep 27, 2020

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Key takeaways...

  • In the insurance industry, a total loss is defined as property that is being written off by the insurance company
  • When a car’s repair costs are higher than it’s Actual Cash Value, the company can declare it a total loss
  • When a vehicle suffers serious structural damage or it begins to rust, it will be totaled because it’s irreparable
  • If your car can be fixed and legally operated on public roads, it may make sense to keep the car
  • To keep a totaled car, you will have to let the insurance company keep the salvage value of the car when settling your claim

Dealing with a total loss claim is never fun. After getting past the initial shock that you’ve been in a serious accident, you’ll have to focus your mind and let it set in that the claim has to be settled. You have to contact your insurer, give your statement, and cooperate during the claims investigation.

After the settlement has been drafted and you’ve reviewed it, it’s your duty to accept the offer or negotiate. After some losses, it’s obvious that the car will be totaled and you’ll start a new mission to find your new car. Sometimes, claims aren’t so cut and dry.

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The damage might not look serious, but due to the fact that the vehicle doesn’t retain much value, it’s totaled anyway. Here’s what you need to know about your rights:

What is a total loss?


Every insurance contract has terms and conditions. Within the terms, you can find an official definition of what a total loss is to your insurer.

Since all property insurance contracts have a clause that says how much an insurer must pay when the property is totaled, the definition is typically the same from carrier to carrier.

A total loss is a judgment that’s made by the insurer saying that the cost to repair the property that the insurer is covering is higher than the value of the coverage.

Sometimes, when the vehicle can’t be repaired because of the nature of the damage, it will be classified as a constructive total loss. This is also a write-off.

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When is a car declared a total loss?

Cars can be totaled after both major and minor accidents.

If you’ve never filed a claim, you could be shocked to receive a notice in the mail showing that the adjuster handling your claim has made you an offer to settle your claim for your physical damage by totaling your car.

This is especially shocking when the car is still operable and functional. What many don’t understand is that it’s not always about the severity of the damage.

A car is totaled when repairs on the vehicle are estimated to cost more than the vehicle’s Actual Cash Value. Since the carrier is only obligated to pay up to the car’s ACV after a damage loss, the company will offer you a payment for the vehicle instead of paying the full repair costs.

What is Actual Cash Value?

Actual Cash Value, also written in your policy as ACV, is a term that’s used quite frequently in your contract and on your declarations page.

Since it’s used so often, you should know what this term means to the insurer when it is placing a value on the property that you’re insuring.

To property insurers, Actual Cash Value is defined as the replacement cost of your property minus depreciation.

Other experts will define ACV as the fair market value of the vehicle. While this is up for interpretation, ACV is technically what a buyer is willing to pay a seller for a vehicle that’s depreciated in value.

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Are there other instances when a car can be totaled?

Some states have special Total Loss Thresholds (TLT) that give insurers the right to total vehicles even when the ACV isn’t exceeded.

When there’s a TLT, the company can legally total a car when the damage exceeds a stated percentage of the car’s fair market value. Some states have higher thresholds of 80 to 90 percent and others have thresholds as low as 60 percent.

If the Total Loss Threshold in your state is 100 percent of the car’s actual value, there’s still a chance that your car could be totaled after estimates for repairs show that the damage doesn’t exceed the car’s value.

The only other time that this can happen is when the car has structural damage that makes it unsafe to drive. If the car has flooded or the frame is bent, the carrier will automatically total it out.

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How much will you be offered to settle a total loss claim?


Total loss settlements can take some time to complete. The adjuster has to look at the condition that your vehicle was in, it’s safety features, the trim level, aftermarket additions, and the demand for the model to decide how much you should reasonably receive.

Here’s what your offer will include:

  • The final Actual Cash Value of the car calculated by the insurance adjuster
  • Estimated cost of sales tax for the replacement vehicle
  • Estimated cost of titling fees
  • Estimate cost of registration fees for replacement vehicle

Can you keep your vehicle if you want to repair it?

It doesn’t always make the most sense to keep a totaled car, but the option is typically there. As long as the vehicle can be repaired and it doesn’t have rust or frame damage, you can keep the car if you tell your insurer that’s what you want to do.

If you don’t want to part with your car, the salvage value of the vehicle will be deducted from your payment.

You have to understand that it will be your responsibility to fix the car if you make the decision to keep the coverage. You should review the repair costs, find out how to get a salvage title, and then determine if this is wise.

If you can easily pass the DMV inspection and you won’t have trouble getting insurance.

It’s your right to keep your car if that’s what you want. Just know what you’re dealing with before you make that decision in haste. If you’ve received an offer, review it closely. Before you decide to keep your car, find out if you can still insure it.

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