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What is the threshold for total loss in Texas?


Question:  By law in Texas, what is the percentage of a car's total value to become a total loss?

Answer: The Texas Department of Insurance (TDI) states that a vehicle can be totaled if the cost of repair exceeds the vehicle's actual cash value (ACV), or exceeds the insurance company's measure to declare a total loss.  So state law is that the threshold for a total loss in Texas is 100% of the car's value.

Each insurance company in Texas is permitted to establish a percentage of damage in comparison to the ACV of a vehicle. If the measurable damage, from hail damage, an accident, or other covered situation meets or exceeds the set percentage the company will automatically declare a total loss.

The TDI goes on to say insurance companies typically use the National Automobile Dealers Association's Used Car Guide to determine the value of your car.

The company's offer might not recognize your car's condition, special features, or value on the local market.This is why you should be prepared to negotiate with the car insurance company to get what you believe is a fair deal after your car has been declared a total loss. 

A company might raise its offer if you can show that your car would sell for a higher price in your area. Get written price quotes for a similar automobile from several used car dealers, or look in the classified section of your local newspaper for used car prices.

In Texas, the Department of Transportation has jurisdiction over salvage vehicles and the rules for salvage vehicles are found in the Code. Chapter 501, title 501.091 defines non-repairable and salvage titles. Here it gives the definition of a salvage motor vehicle and in subsection 1 states that this includes a vehicle that is damaged or is missing a major component part to the extent that the cost of repair including parts and labor, exceeds the actual value of the motor vehicle immediately before the damage.

Texas law thus defines a vehicle to be salvaged at the point when the damages exceed the ACV of the vehicle however as mentioned earlier the state does allow insurance companies to total out a car (find it to be a salvage vehicle) before the costs of repairs exceeds the value of the vehicle. So it is left up to the discretion of auto insurance companies to determine when a car is a total loss

Sometimes the insurance company may want to total your car, but you would prefer to have it repaired instead. You usually can keep your car if you are willing to subtract its salvage value from the insurance settlement. The TDI warns consumers to make sure the cost to repair the car will not exceed the car's actual cash value. To find out the salvage value, contact local salvage yards for estimates.

If your insurance company has totaled out your vehicle you do not agree with the settlement amount offered to you than you may look at the appraisal clause of your car insurance policy.

An appraisal allows you and your insurance carrier to hire separate damage appraisers. The two appraisers choose a third appraiser to act as an "umpire." The appraisers review your claim, and the umpire rules on any disagreements. The appraisal decision is binding as to the amount of the loss. If there is a dispute about what is covered, you can pursue a settlement of the coverage issue after the appraisal. You must pay for your appraiser and half of the umpire's costs.

Appraisal is available only in disputes between you and your insurance company. It is not available if the other driver was at fault and you disagree with his or her company's offer since this is a third party claim and not a first party claim with your own insurer whom you have a contract with terms that allow for an appraisal.

If you want to know more about the laws of Texas related to insurance claims you can contact the TDI. If you want to know about how your specific insurance provider's calculates a car to be a total loss (what their percentage of damage is in relation to the car's ACV) contact your insurance agent.

Click here to compare state car insurance rates.


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2 Responses to "What is the threshold for total loss in Texas?"
  1. Visitor

    You do not make it clear from your text above if the insurer still has to pay full ACV for a 'totaled' vehicle. I understand they can refuse to repair if the costs exceeds their threshold (btw, how is a consumer supposed to learn what that is before buying coverage? I don't see it in the state mandated policy language). Let's say my ACV is $10K, and it is 'totaled' because my insurer has a 75% rule, and the cost to repair is $8K: must they still pay me $10K?

  2. Visitor

    I had to hire Houston Auto Appraisers to assist me with my total loss appraisal. The insurance company offered me a value far below what I was finding online for my vehicle. With help I settled for $4900 more than what the insurance offered. That is a big difference. I was referred to them by the Texas Department of Insurance.