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A total loss threshold is the point where an insurance company is required to declare your car a total loss. Each state has their own laws to determine when your car should be considered totaled.
Published April 20, 20225 min read
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Comprehensive and collision coverage are the parts of your car insurance policy that pay out if your car is totaled, whether it’s in an accident or damaged some other way, but how do insurance companies decide when to total a car?
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A total loss threshold is the line between a damaged car that’s worth repairing and a car that’s too damaged to be worth saving. Your car’s repair cost, market value, and the cost to purchase a comparable vehicle all play a large part in determining when you cross the total loss threshold in your state.
A total loss threshold is the point where it is more expensive to repair your damaged car than it is to replace it.
There are two ways to calculate a total loss threshold: simple percentage threshold and total loss formula.
Total loss thresholds are set by the state, and some states set their total loss threshold below the vehicle’s actual cash value.
A car is considered totaled when it is more expensive to repair than it is to replace. But states set different total loss thresholds, which is the point at which car insurance companies are required to declare a car a total loss.
For example if your state’s total loss threshold is 75%, that means once repairs for your vehicle go beyond 75% of your car’s actual cash value it is declared a total loss.
Each state has its own laws about when a car should be totaled, and in some places it may not take much damage to total your car, especially if you have an older vehicle.
|State||Total Loss Threshold|
|Alaska||Total loss formula|
|Arizona||Total loss formula|
|California||Total loss formula|
|Connecticut||Total loss formula|
|Delaware||Total loss formula|
|Georgia||Total loss formula|
|Hawaii||Total loss formula|
|Idaho||Total loss formula|
|Illinois||Total loss formula|
|Maine||Total loss formula|
|Massachusetts||Total loss formula|
|Mississippi||Total loss formula|
|Montana||Total loss formula|
|New Jersey||Total loss formula|
|New Mexico||Total loss formula|
|Ohio||Total loss formula|
|Pennsylvania||Total loss formula|
|Rhode Island||Total loss formula|
|South Dakota||Total loss formula|
|Utah||Total loss formula|
|Vermont||Total loss formula|
|Washington||Total loss formula|
California’s total loss threshold is based on the state’s total loss formula, which states that a car is totaled if the cost of repairs (plus the vehicle’s salvage value) are greater than or equal to the actual cash value (ACV) of your vehicle.
Texas sets the total loss threshold at 100%. This means a vehicle must be declared totaled if the cost of repairs are 100% or more of the car’s ACV.
Florida’s total loss threshold is set at 80%, which means a vehicle is declared totaled if the cost of repairs are 80% or more of the car’s ACV.
Georgia’s total loss threshold is based on the state’s total loss formula. A car is considered totaled in Georgia when the vehicle’s ACV is less than the cost to repair the vehicle, plus the salvage value of the car.
There are two ways to calculate a total loss threshold: simple percentage threshold and total loss formula. The type of total loss threshold that applies to you is determined by the laws in your state.
The simple percentage threshold is exactly what it sounds like: the percentage of your vehicle’s ACV that repairs need to meet for the vehicle to be declared a total loss.
If your car is worth $10,000 and you live in a state that has a simple percentage threshold of 75%, an accident that caused $7,500 or more worth of damage to your vehicle would make your car a total loss.
A total loss formula (TLF) is a comparison of your vehicle’s ACV to the total of your repair costs and the car’s salvage value.
If your car is worth $10,000 and you live in a state that uses total loss formula to determine your total loss threshold, a car accident that causes $7,500 in damage (and has a $1,000 in salvage value) would not be considered a total loss because the total cost of repairs plus the salvage cost is less than the ACV of your car.
Driving a damaged car can be dangerous, and any time a car is in an accident there is a possibility of hidden damage going undetected in the repair process.
If a car has undetected damage (for example, damaged rotors or brake calipers) and is driven on the road, there is a chance that the damage could be enough to cause a car accident.
Because of this possibility, some states total a car when the damage is only 75% or 80% of the car’s value to prevent a potentially damaged vehicle from being on the road. This commonly applies to flooded vehicles as well, and some states have separate total loss formulas specifically for flooded cars.
Insurance adjusters consider a number of factors when evaluating a claim, including the make and model of your car, its age, and its general condition before and after the accident. The total loss threshold only comes into play once they have all the necessary information.
Insurance companies determine whether or not you have a total loss claim by using the total loss formula set by your state.
For instance, Oklahoma has a 60% simple percentage threshold, the lowest in the nation, which means someone who is in a car accident in Oklahoma is more likely to have their car totaled by an insurance company than a driver in neighboring Texas, which has a 100% percentage threshold.
Yes, it is possible to negotiate a total loss settlement with your insurance company, but it isn’t a guarantee. Your best bet for negotiating the value of your car is to prove it is worth more than your insurance company thinks, with things like:
Upgrades: If you added a sound system, remote starter, or other things to your car, make sure your insurance company knows about those changes.
Maintenance: If you have taken stellar care of your car, you can make the argument that your vehicle is worth more than they determined. Have a copy of your repair history, oil changes, and other maintenance records before making this argument.
New stuff: Did you just put four new tires on your car? Did you just fill the gas tank? You could potentially argue that these things add value to your vehicle that the insurance company isn’t considering.
If your vehicle is declared a total loss, the insurance company will write you a check for the ACV of your vehicle, plus the salvage value of your car. But what if you have a car loan? It is possible (and, in fact, common) to owe more on your loan than your car is worth after an accident.
Gap insurance is designed to cover you if your vehicle’s actual cash value is less than you owe on your loan. Specifically, gap coverage pays the difference between the value of your vehicle and the balance on your loan.
Liability insurance, which covers bodily injury and property damage you cause to another person in an accident, does adhere to the total loss thresholds in every state. Personal injury, medical costs, and other costs that aren’t considered property damage don’t impact the total loss threshold for your car.
You may be able to keep a salvaged car, but it depends on the situation. Also, the value of a salvage vehicle is included in the payment you get from your insurance company, which means keeping a salvaged car will lower the payment you receive for your totaled vehicle.
Depending on the value of your car and the amount of damage caused by the hail, it is possible your car could be totaled by a serious hail storm.
Depending on what type of coverage you have, you may be able to file a diminished value claim after an accident. Check the details of your insurance policy or reach out to your insurance agent to find out if you can file a diminished value claim.