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What is the threshold for total loss in Texas?

Question: In Texas, what is the threshold for a car to be declared 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 car insurance company's measure to declare a total loss. So state law is that the threshold for a total loss in Texas is 100 percent 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 car from several used car dealers, or look in the classified section of your local newspaper for used car prices.

Sometimes a car 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 totaled out your vehicle and you do not agree with the settlement amount offered, you should review 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.

If you want more information about  how car insurance works in Texas, visit our Texas car insurance page.


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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.