How Is a Vehicle Considered Totaled?

May 3, 2023

What Does ‘Totaling’ a Car Mean?

You may have heard the term 'totaled' when referring to a vehicle, but do you know what it means? A car or truck is considered totaled when the cost of repairs exceeds the vehicle's value, making it uneconomical to repair. This determination can be made after a collision, natural disaster, or other damage.

How Does the Insurance Company Make the Decision to Total a Car?

When a vehicle is damaged, the owner typically files a claim with their insurance company to cover the cost of repairs. The insurance company then sends an adjuster to assess the damage and determine whether the car should be repaired or declared a total loss. The adjuster evaluates the cost of repairs, the vehicle's market value, and any applicable state laws. If the cost of repairs is higher than the car's value or if the vehicle cannot be safely repaired, the insurance company will likely declare it a total loss. The process of determining if a car is a total loss varies depending on the insurance company and state regulations. However, there are two common methods used by insurers: Total Loss Threshold and Total Loss Formula.

How Does Total Loss Threshold Compare to Total Loss Formula?

Total Loss Threshold (TLT) and Total Loss Formula (TLF) are two methods used by insurance companies to determine if a vehicle is considered a total loss. Although they both aim to make this determination, they do so using different calculations. Here's a comparison of the two methods: Total Loss Threshold (TLT) is a state-specific percentage that compares the cost of repairs to the vehicle's actual cash value (ACV). If the repair costs reach or exceed the set percentage of the vehicle's ACV, it is considered a total loss. For example, suppose a state has a TLT of 70%. If the repair costs amount to $7,000 for a vehicle with an ACV of $10,000, the vehicle would be considered a total loss, as the repair costs represent 70% of the ACV. The TLT percentage varies from state to state, with some states having a lower threshold (e.g., 50%) and others a higher one (e.g., 80%). It's essential to be aware of the TLT in your state when dealing with insurance claims related to vehicle damage. The Total Loss Formula (TLF) is used in states that do not have a specific TLT. The TLF is a calculation that considers the cost of repairs, the salvage value of the vehicle, and the vehicle's actual cash value (ACV). If the sum of the repair costs and the salvage value is greater than the ACV, the vehicle is considered a total loss. For example, suppose a vehicle has an ACV of $10,000, repair costs of $7,500, and a salvage value of $3,000. The sum of the repair costs and salvage value is $10,500. Since this amount is greater than the ACV, the vehicle would be considered a total loss.

How Does the Insurance Company Determine Vehicle Value?

One of the key factors in deciding if a car is totaled is its actual cash value (ACV). Insurance companies use various factors to determine a vehicle's ACV, including its make, model, age, mileage, and condition. They may also use sources like Kelley Blue Book or NADA Guides to get an estimate of the car's value. It's important to remember that the ACV may not match what you paid for your vehicle or what you owe on your loan. If your car is declared a total loss, you will typically receive a settlement from your insurance company based on the ACV minus your deductible.

How Will Gap Insurance Help Me?

If you owe more on your car loan than the vehicle's actual cash value, you might end up in a difficult financial situation when your car is totaled. Gap insurance is a policy add-on that covers the difference between the ACV and the amount you still owe on your loan. If you have gap insurance and your car is declared a total loss, your insurance company will pay the difference, so you won't be left with a loan balance for a car you can no longer use.

How Can a Lawyer Help?

Navigating the complex world of insurance claims and settlements can be challenging, especially when dealing with a totaled vehicle. ` can help by: a) Negotiating with insurance companies: Insurance adjusters may try to undervalue your vehicle or offer a low settlement amount. A lawyer can negotiate on your behalf, ensuring you receive fair compensation for your totaled car. b) Guiding you through the process: A lawyer can help you understand the various steps involved in declaring a vehicle totaled and dealing with insurance claims, providing valuable guidance and support throughout the process. c) Ensuring proper documentation: A lawyer can review your insurance policy and help you gather all necessary documentation, including repair estimates, vehicle valuations, and more, to build a strong case for your claim. d) Representing you in disputes: If your insurance company disputes your claim or if you have a disagreement with the other party involved in an accident, a lawyer can represent your interests and help you reach a favorable resolution. Understanding the process of declaring a vehicle totaled and the implications it has for you as a vehicle owner is crucial. Seeking the assistance of an experienced lawyer can help you navigate the complexities of insurance claims and settlements, ensuring you receive fair compensation for your totaled vehicle. Call High Stakes Injury Law at (702) 444-3228 for a free case review/evaluation.