CarInsurance.com Insights
- Total loss rules vary by state. Some use a fixed percentage, while others apply a total-loss formula that combines repair costs, salvage value, and market value.
- Your payout is based on actual cash value. Insurers typically pay the car’s market value at the time of the accident, minus your deductible — not the original purchase price.
- Gap insurance can protect you. If your loan or lease balance exceeds the car’s value, gap coverage pays the difference so you’re not stuck owing money after a total loss.
State law determines when your insurer must declare your car a total loss. Some states set a fixed damage threshold, typically 60% to 100% of the car’s actual cash value, while others use a total loss formula (TLF) that weighs repair costs against the car’s salvage value.
Your state’s approach helps determine whether your car gets repaired or considered a total loss after an accident.
Total loss rules set the baseline for when an insurer must total a car, but your insurer may make that decision before the legal threshold is reached. Understanding your state’s method, whether it is a fixed percentage or a total loss formula, can help you better evaluate a settlement offer. If you carry a loan or lease balance, gap insurance is worth reviewing before an accident, not after.
What is a total loss threshold?
Some states have a total loss threshold. In these states, insurers will declare a vehicle totaled if the cost to repair it exceeds the state’s established percentage of the car’s actual cash value.
So, if the state’s total loss threshold is 75%, an insurer will declare a car totaled when the cost to repair it exceeds 75% of its value.
In other words, if the repair cost exceeds the total loss threshold, the insurer will declare the car a total loss and pay the policyholder the actual cash value rather than repair or replace the damaged car.
The threshold percentage varies by state. For example, a car with damage totaling 75% of its value is totaled in New York but considered repairable in Texas, where the threshold is 100%.
Not all states have total loss thresholds. In some states, determining a car’s total loss is based on a total loss formula. In this scenario, the insurer compares your vehicle’s actual cash value (ACV) to the repair cost minus the vehicle’s salvage value.
If this number equals or exceeds your vehicle’s pre-accident ACV, your car will be totaled. But if the number is lower than the ACV of your car, the insurer may decide to repair it.
Total loss thresholds by state
The total-loss thresholds vary by state, and each state has its own rules for when a car should be declared totaled. In some states, declaring a car totaled might not take much damage, especially if you drive an older model.
In the table below, see the total loss thresholds by state.
| State | Threshold |
|---|---|
| Alabama | 75% |
| Alaska | TLF |
| Arizona | TLF |
| Arkansas | 70% |
| California | TLF |
| Colorado | 100% |
| Connecticut | TLF |
| Delaware | TLF |
| Florida | 80% |
| Georgia | TLF |
| Hawaii | TLF |
| Idaho | TLF |
| Illinois | TLF |
| Indiana | 70% |
| Iowa | 70% |
| Kansas | 75% |
| Kentucky | 75% |
| Louisiana | 75% |
| Maine | TLF |
| Maryland | 75% |
| Massachusetts | TLF |
| Michigan | 75% |
| Minnesota | 80% |
| Mississippi | TLF |
| Missouri | 80% |
| Montana | TLF |
| Nebraska | 75% |
| Nevada | 65% |
| New Hampshire | 75% |
| New Jersey | TLF |
| New Mexico | TLF |
| New York | 75% |
| North Carolina | 75% |
| North Dakota | 75% |
| Ohio | TLF |
| Oklahoma | 60% |
| Oregon | 80% |
| Pennsylvania | TLF |
| Rhode Island | 75% |
| South Carolina | 75% |
| South Dakota | TLF |
| Tennessee | 75% |
| Texas | 100% |
| Utah | TLF |
| Vermont | TLF |
| Virginia | 75% |
| Washington | TLF |
| West Virginia | 75% |
| Wisconsin | 70% |
| Wyoming | 75% |
How to calculate a total loss claim payout
Calculating a total loss claim payout is relatively straightforward. For example, if the state has a total loss threshold of 75% and a vehicle worth $5,000 needs repairs of $4,000, you would divide $4,000 by $5,000 and get 80%. That would be enough to total the car.
There are two ways to determine the total loss thresholds used by different states:
Simple percentage threshold
It refers to the percentage of the vehicle’s ACV that the cost of repairs must reach for the car to be declared a total loss. Some states use a simple percentage threshold rather than the total loss formula (TLF). Simple percentage thresholds range from 60% to 100%, depending on your state.
Total loss formula
The total loss formula is the calculation insurance companies use to determine whether a damaged vehicle should be declared a total loss. The formula typically compares the cost of repairs plus the salvage value to the vehicle’s actual cash value (ACV). If the cost of repairs exceeds a certain percentage, the car is deemed a total loss.
How to determine a loss using the total loss formula
Your vehicle is totaled if:
Repair costs + salvage value > actual cash value
If a car is worth $10,000, its salvage value is $2,000 and the cost of repairs after an accident is $9,000, the insurer would declare the vehicle a total loss because the repair costs exceed the TLF.
This means the insurer would pay the car’s fair market value minus any deductible.
Why do some states use a percentage instead of the total loss formula?
Some states use a percentage threshold to determine whether a vehicle is a total loss after an accident, rather than the total loss formula.
States can prevent potential road dangers by totaling cars whose repair costs exceed a certain percentage of the vehicle’s value. This helps ensure that unsafe vehicles with significant damage do not remain in operation, keeping people safe.
Most states that use a fixed threshold set the percentage between 70% and 80% of the car’s actual cash value. This also applies to vehicles damaged by flood. These vehicles have lower threshold percentages, and some states even use different total-loss formulas for flood-damaged vehicles.
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What to do if your car is declared a total loss
If your car is deemed a total loss, here are steps to make the process smoother and ensure you get the settlement you deserve:
- Collect your paperwork: Gather your car’s title, registration, loan payoff information, and maintenance records. Insurers may request these before processing your claim.
- Remove personal belongings: Once the insurer declares a total loss, the car will often be moved to a salvage yard. Make sure you remove all personal items.
- Review your insurer’s valuation: Compare it with recent local listings and comparable sales before accepting any offer. If the settlement seems low, you have the right to negotiate.
- Ask about sales tax and fees: In many states, insurers must also cover sales tax and title/registration fees for your replacement vehicle.
- Decide whether to keep the car: In some cases, you can keep a totaled car, but it will receive a salvage title. This usually reduces its resale value and may affect insurability.
- Confirm loan payoff or settlement details: If you have an auto loan or lease, the insurer typically pays your lender directly. Make sure the loan is fully satisfied and ask if any balance remains.
And always double-check your insurer’s payout against independent sources like Kelley Blue Book or Edmunds. If the value seems low, provide documentation to support a higher settlement.
If you are in an accident that totals your car, your rates will go up. One of the best ways to bring them back down is to compare insurance quotes. Insurers rate risk differently, so premium quotes vary dramatically.
How a total loss affects your insurance
When your car is declared a total loss, your insurance payout depends on your policy and coverage type:
- Actual cash value (ACV): Most insurers pay you the car’s market value at the time of the accident, minus your deductible. This is not the amount you originally paid for the vehicle.
- Deductibles still apply: Even in a total loss, you’re responsible for paying your deductible before the insurer issues a settlement check.
- Loan or lease balance: If you owe more on your car loan than the car is worth, you’ll still be on the hook for the difference — unless you have gap insurance.
- Gap insurance: This optional coverage pays the difference between your insurer’s settlement and your remaining loan or lease balance.
- New car replacement coverage: Some insurers offer this add-on for newer vehicles. Instead of ACV, the policy covers the cost to replace your car with a brand-new model.
Without gap insurance, drivers can end up paying thousands out of pocket if their car is totaled while they still have a loan or lease balance higher than the vehicle’s market value.
How do adjusters determine if a car is totaled?
A claims adjuster will examine the car and calculate the cost of repairs and your car’s pre-accident cash value, considering make, model, year, options, mileage and condition. If the vehicle meets the required threshold, it will be totaled.
While state law may mandate total-loss thresholds, they rarely apply. Even though insurers must total cars over these thresholds, they can and do total vehicles below them.
“Insurance carriers that operate in multiple states have an internal mechanism for assessing total-loss levels to be consistent regardless of where the vehicle is located,” says Tony Rached, principal owner of Lira VC in Georgia.
Frequently Asked Questions: Total loss thresholds
How are insurance payouts calculated for totaled cars?
The amount that an insurance company pays for a totaled car will depend on several factors, such as the vehicle’s make and model, the car’s age and condition, the extent of the damage, your state and the insurance coverage limits. If you have collision coverage, your insurer will typically pay you the car’s actual cash value (ACV), minus your deductibles, if it is deemed a total loss.
How does a total loss claim affect car insurance rates?
A total loss insurance claim can significantly impact your auto insurance rates. The policyholder may see their premiums increase because their insurer views them as a higher-risk driver. According to CarInsurance.com data, an at-fault bodily injury accident can increase your insurance coverage rates by 58%, on average, but the exact rates vary based on individual factors.
What percentage of damage totals a car?
The percentage of damage that totals a car varies by state and insurer. In some states, a vehicle may be considered a total loss if the repair cost exceeds 75% of its actual cash value (ACV).
In other states, the threshold may range from 60% to 100%. A vehicle is generally considered a total loss when the repair cost exceeds its value and is deemed extremely expensive.
Can you keep your car if it’s a total loss?
If you decide to keep your car, your insurer will pay you the car’s actual cash value minus its salvage value and any deductible you owe. You will need to bring it up to a state of repair that makes it safe to drive.
The car might have hidden damage that you do not suspect. Once you or a mechanic discovers this damage, you must make additional repairs, which adds to the cost.
Can you negotiate a total loss settlement?
Yes, you can negotiate a total loss settlement with your insurance company if you believe their offer is too low. To negotiate, you should gather evidence to support your case, such as recent maintenance receipts, equipment, and any new items you have installed in your car. You can also hire an independent appraiser to assess the value of your totaled vehicle.
Once you have this evidence, you can present it to your insurer and negotiate for a higher settlement.
