Updated: July 29, 2025
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An actual total loss happens when the repair costs for your vehicle surpass its actual cash value (ACV), which is the amount your car was worth immediately before the damage occurred.
A car can become totaled after an accident, a natural calamity, theft or even failure to change the oil regularly leads to complete engine failure.
Providers use either one of two methods to decide whether your car is totaled: total loss formula (TLF) or total loss threshold (TLT). The total loss threshold varies by state.
An actual total loss occurs when the cost to repair your vehicle exceeds its actual cash value (ACV), or the amount your car was worth just before the damage occurred. In insurance terms, the car is considered beyond economical repair and is no longer worth fixing.
While the word totaled may bring to mind a crushed or burned vehicle, a car doesn't have to look destroyed to be declared a total loss.
Vehicles can be totaled for several reasons, including:
A common misconception is that any badly damaged car will automatically be totaled. In reality, insurers evaluate both the repair cost and the vehicle's ACV to make the determination. This is why a newer vehicle with similar damage might be repaired, while an older car with less damage could be written off as a total loss.
While total loss insurance isn't a specific policy you can purchase, this term may refer to the types of car insurance coverage that pay out when your vehicle is declared a total loss. To receive compensation for a totaled vehicle, your policy must include one or more of the following:
If your policy includes only liability insurance, your insurer won’t pay to replace your car if it's totaled, even if the accident wasn’t your fault. You would need to file a third-party claim with the at-fault driver's insurance company, though this depends on fault determination and the other driver having adequate coverage.
Covers damage to your car if you collide with another vehicle or object, regardless of who is at fault. If your car is totaled in a crash, collision coverage kicks in.
Covers non-collision events like theft, fire, flood, hail or falling objects. If your car is stolen and unrecoverable or severely damaged by a natural disaster, this coverage applies.
Optional but highly recommended for financed or leased cars. Gap coverage pays the difference between your car’s ACV and the amount you still owe on your loan or lease if the vehicle is totaled.
Many people assume that insurance companies will deem their vehicle a total loss just because they wrecked it. Even though this may be true in some cases, insurance companies have a precise definition of the word totaled. For insurers to declare a vehicle a total loss, they check whether the cost of repairing the car is more than its ACV.
When your vehicle is damaged, your insurance company won’t just look at how it appears. Insurers use one of two main methods to make this decision, depending on your state: the total loss formula (TLF) or the total loss threshold (TLT).
See the table below to see whether your state follows TLF or TLT. Individual states set total loss thresholds and may change them. Check with your state's insurance department for current regulations.
State | TLT/TLF |
|---|---|
Alabama | 75% |
Alaska | TLF |
Arizona | TLF |
Arkansas | 70% |
California | TLF |
Colorado | 100% |
Connecticut | TLF |
Delaware | TLF |
District of Columbia | 75% |
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 | TLF |
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% |
Actual cash value (ACV) is the amount your car was worth just before the damage occurred. Insurers calculate ACV by starting with the vehicle's original purchase price and subtracting depreciation.
However, the exact value also depends on:
AVC FORMULA:
ACV = Original Price − Depreciation
Even if your car seems almost new, depreciation starts when you drive it off the lot. If you’re financing or leasing, the ACV may be lower than your loan balance, in which case, gap insurance can help cover the difference.
Thirty states use the total loss threshold (TLT), which sets a percentage point at which a vehicle is declared totaled. If the repair costs meet or exceed this threshold, which can be between 60% and 100% of your car’s ACV, your insurer will total the car.
For instance, if your state’s TLT is 75% and your car’s ACV is $10,000, repairs costing $7,500 or more will result in a total loss designation.
States that use the total loss formula (TLF) determine when to declare a vehicle a total loss. Under this method, insurers add together:
If the sum of those values is equal to or greater than the ACV, the vehicle is considered totaled.
Repair Costs + Salvage Value ≥ Actual Cash Value
Once your vehicle is deemed a total loss by your insurance company, two possible scenarios could follow.
Scenario | Result |
|---|---|
You agree that your car is a total loss | If you accept your insurance company's determination that your vehicle is a total loss, you'll need to take several steps. First, you should take out all personal items from the car, including your license plates. Next, turn over the vehicle and keys to your insurer while completing any required documentation. After finishing this process, your car will officially receive salvage status. |
You disagree that your car is a total loss | If you believe your insurance company made an error in declaring your car a total loss, you have the right to challenge this decision through negotiations with your claims adjuster. To succeed, you must show that your vehicle's value exceeds the amount your insurer calculated. You need evidence such as documentation of vehicle modifications that may not have been factored into the Actual Cash Value assessment. Providing receipts, photos or professional appraisals of these upgrades can strengthen your position. |
Once your vehicle is declared a total loss, insurance companies have the legal right to sell it and recoup some of their losses. Your insurance company will inform the Department of Motor Vehicles that your car has been totaled when they take it.
You may disagree with your insurer’s decision if you feel the settlement amount offered is lower than what your car was worth.
You can negotiate to get a better price or take legal recourse, but you will need two types of evidence that can support your claims:
You can use photos to show the car's previous condition and showcase significant modifications that could increase its value.
The word salvage means to extract something of value from a damaged item. A car titled as a salvage indicates that it is damaged and considered totaled by an insurance company.
If an insured vehicle is damaged, you will need to contact your insurer to determine the extent of the damage and receive compensation based on the terms of your policy.
Filing claims with your insurer involves multiple steps.
Most insurers allow you to file claims over the phone, on the company website, or on a mobile app. Be prepared to provide:
Schedule an inspection of your damaged car with the insurance adjuster. Insurance companies usually don’t require vehicle owners to be present during an inspection. The insurance adjuster may contact you before the scheduled inspection to get details and answers to questions about your car.
After the vehicle is inspected, the insurance adjuster will give you a quote with your settlement amount. If your insurance provides rental or any other coverage, your insurer will include that in the quote.
You’ll need to remove your personal belongings from the damaged car and hand the vehicle over to your insurer. If your car is in a storage facility, inform your insurance company that they have your permission to move the vehicle. In most cases, the insurer will take it to a salvage yard.
Your insurer may require you to sign paperwork in person or electronically to officially surrender ownership of your vehicle. Once this process is complete, you’ll receive your settlement amount through the agreed-upon mode, typically by check or wire transfer.
There is no fixed amount that an insurer will pay for a totaled car. How much you receive will depend on:
You can request a copy of the insurer’s valuation report to see how they calculated your car’s ACV.
If you total your car while you're still financing or leasing it, its ACV could be lower than your loan balance. Having gap insurance can help cover this difference.
For instance, if your loan balance is $22,000 but your car’s ACV is $17,000, your gap insurance would pay for the $5,000 shortfall. Gap insurance is especially valuable for new cars, which lose value rapidly in the first few years. However, gap insurance availability varies by insurer and may have eligibility requirements.
If the settlement amount is negligible or you want to avoid an increase in your insurance rates, you can cancel your car insurance claim. If your provider has already sent you a check, call them to cancel your claim and send it back.
When your car suffers severe damage in an accident, your insurance company might declare it a total loss if repairs aren't feasible. Insurers rely on specific calculations, either a total loss threshold or total loss formula, to decide. This decision directly impacts how much money you'll receive and what choices you have for getting back on the road with a replacement vehicle.
Here are straightforward answers to questions people frequently ask about total loss situations, covering how insurers make these decisions and what this means for your coverage:
Insurance companies declare a vehicle a total loss when the cost of repairing the car is more than its ACV.
Liability car insurance covers injuries and damage you cause to others in an accident. If you only have liability insurance when your car is totaled, you’ll have to pay to replace your vehicle yourself. If your vehicle was totaled due to an accident you weren’t responsible for, you might need to also file a claim with the other driver’s insurance company.
The total loss formula is as follows: Cost of Repairs + Salvage Value ≥ Actual Cash Value.
Your car insurance premiums could increase if your vehicle is deemed a total loss. However, this can depend on what caused damage to your car.
That depends on the state where you live. You can request your insurer to keep your car, but this could lead to a reduction in your claim value.
MoneyGeek adheres to a stringent data collection and analysis process. We gather information from credible and reliable sources, including the objective opinions of leading industry experts, agencies and entities.
Our editing process also includes an in-depth analysis of financial topics and linking to reputable sources whenever possible. We double-check our source data to ensure it’s still relevant, factual and up to date per our editorial policy and standards.
For this guide, we investigated how each state defined total loss based on data from MWL law, a law firm that specializes in insurance and subrogation recovery. Since each state has a different definition of a total loss, we verified MWL law data with information from state governments.
About Mark Fitzpatrick
Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.
Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!
Passionate about economics and insurance, he aims to promote transparency in financial topics and empower others to make confident money decisions.
