When a car is damaged beyond repair or the cost of repairing it is more than its actual cash value, it is considered a total loss. Each state sets a total loss threshold – the point at which car insurance companies must declare a vehicle a total loss.

For instance, a state may set a total loss threshold to 75% of the car’s actual cash value; a car’s actual cash value is $10,000, and the repair costs exceed $7,500 (75% of $10,000), the insurance company would declare the car a total loss and pay the vehicle’s fair market value to the policyholder.

What is a total loss threshold?

A total loss threshold is a percentage of a vehicle’s actual cash value (ACV) that an insurance company uses to determine if a car should be declared a total loss after damage.

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 instead of repairing or replacing 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%.

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.

Total loss formula: It compares your vehicle’s actual cash value (ACV) to the sum of the repair cost and the vehicle’s salvage value. If this number equals or exceeds your vehicle’s ACV before it was in an accident, your car will be totaled. But if the number is lower than the ACV of your vehicle, the insurer may decide to repair it.

Total loss threshold by state

The total loss thresholds vary by state and every state has its own rules about 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 car model.

Here are the specific thresholds for each state:

Total loss thresholds for each state
State Threshold
New Hampshire75%
New JerseyTLF
New MexicoTLF
New York75%
North Carolina75%
North Dakota75%
Rhode IslandTLF
South Carolina75%
South DakotaTLF
West Virginia75%

Note: 22 states don’t assign a specific threshold percentage but instead use a total loss formula (TLF).

What is the total loss formula?

The total loss formula refers to the calculation used by insurance companies 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.

Tip iconTotal Loss Formula example

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 considered a total loss after an accident instead of using the total loss formula. The car might have hidden damage that will cost even more.

States can prevent potential danger on the roads 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 total loss formula set the percentage between 70% and 80% of the car’s value. This also applies to vehicles damaged by flood. These vehicles have lower threshold percentages and some states even have different total loss formulas for flood-damaged vehicles.

What happens if your car is declared a total loss?

Once your car is totaled (and you are not fighting the decision), your insurer will most likely require you to do the following:

  • Remove the license plate
  • Remove all personal items
  • Give your keys to your claims adjuster
  • Notify your lender if you have a loan or lease on the vehicle
  • Ask if your policy includes rental car coverage

Your rates will probably be headed up if you are in an accident that results in your car being totaled. One of the best ways to bring them back down is to compare insurance quotes. Insurers rate risk differently, so premium quotes can vary dramatically.

What percentage of damage totals a car?

The percentage of damage that totals a car varies by state and insurer. In some states, a car may be considered a total loss if the repair cost exceeds 75% of its actual cash value (ACV). In other states, the threshold may be as low as 60%. 

Additionally, some insurers may have their own guidelines for determining when a car is considered a total loss. However, in general, a vehicle is regarded as a total loss when the repair cost exceeds its value and is deemed extremely expensive.

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 come into play. Even though insurers must total the cars over these thresholds, they can and do total vehicles under the threshold.

“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.

Can I keep my car if it’s totaled?

It is possible to keep your car if it’s been declared a total loss by the insurance company. If you choose to keep the vehicle, the insurance company will deduct the salvage value from the total loss settlement amount. You can then use the remaining settlement amount to repair the car or use it for other purposes.

In addition, the car now has a salvage title attached to it, making it more difficult to insure, even if it has been repaired. A salvage title can also seriously impact a vehicle’s resale value, so if you plan on selling it at some point, it will be worth much less than a similar vehicle with a clean title.

What happens if your car is totaled and you have gap insurance?

If you have gap insurance and your car is totaled, your gap insurance policy will help cover the difference between the actual cash value of your vehicle and the remaining balance on your auto loan or lease.

When a car is totaled, the insurance company determines its actual cash value (ACV) based on factors such as the car’s age, mileage and condition. You will be left with a gap if the ACV is less than what you owe on your car loan or lease. 

This is where gap insurance comes in. It is designed to cover the gap so you don’t have an unexpected financial burden. The policy will pay the difference between the ACV and your outstanding balance up to the policy limits.

How much is the insurance payout 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 any deductibles, if it is deemed a total loss. 

FAQ: Total loss thresholds

Can I keep my car if the insurance company declares it a salvage vehicle?

You can keep your car if the insurance company declares it a salvage vehicle. But if you decide to keep the car, you must obtain a salvage title from your state’s department of motor vehicles (DMV). This title indicates that the car has been damaged and is no longer roadworthy or safe to drive until it is repaired and passes a state inspection. 

How does total loss affect car insurance rates?

A total loss insurance claim can significantly impact your auto insurance rates. The policyholder may see an increase in their premiums because their insurer may see them as a higher risk driver. An at-fault bodily-injury accident can increase your insurance coverage rates by 58% on average, according to CarInsurance.com data. 

The exact rates vary based on individual factors. Car insurance companies use a variety of factors to determine rates, including the policyholder’s claims history, driving record and credit score.

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 or if you have installed any new stuff 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.

Laura Longero

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Laura Longero

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Laura is an award-winning editor with experience in content and communications covering auto insurance and personal finance. She has written for several media outlets, including the USA Today Network. She most recently worked in the public sector for the Nevada Department of Transportation.

John McCormick

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John McCormick

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John is the editorial director for CarInsurance.com, Insurance.com and Insure.com. Before joining QuinStreet, John was a deputy editor at The Wall Street Journal and had been an editor and reporter at a number of other media outlets where he covered insurance, personal finance, and technology.

Leslie Kasperowicz

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Leslie Kasperowicz

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Leslie Kasperowicz is an insurance educator and content creation professional with nearly two decades of experience first directly in the insurance industry at Farmers Insurance and then as a writer, researcher, and educator for insurance shoppers writing for sites like ExpertInsuranceReviews.com and InsuranceHotline.com and managing content, now at CarInsurance.com.

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