An insurance company will typically declare your car a total loss, or "total" it, when the estimated cost to repair it exceeds a certain percentage of the car's actual cash value (ACV). This percentage, known as the total loss threshold (TLT), is often set by state law, commonly ranging from 70% to 80% of the ACV. The decision isn't based on repair cost alone; insurers also factor in the car's salvage value—what it's worth as scrap or for parts.
The core calculation is: Cost of Repairs + Salvage Value > Actual Cash Value. If this equation is true, the vehicle is deemed a total loss because it's more economical for the insurer to pay you its value than to fix it.
Several key factors influence this decision:
- State Regulations: Your state's insurance department sets the rules. Some use a strict TLT (like 75%), while others use a "Total Loss Formula" as described above.
- Extent of Damage: Severe structural (frame) damage, major flood immersion, or deployed airbags often lead to a total loss due to high repair costs and safety concerns.
- Vehicle's Age and Value: Older cars with lower ACV are much more likely to be totaled, even from what seems like moderate damage.
- Salvage Title Laws: If a previously repaired car is damaged again, the threshold for totaling it is often much lower.
When your car is totaled, the insurer will pay you the ACV minus your deductible. This ACV is based on the pre-accident market value of similar cars in your area.
| State | Common Total Loss Threshold | Governing Body |
|---|
| Alabama | 75% | Alabama Department of Insurance |
| California | Total Loss Formula | California Department of Insurance |
| Florida | 80% | Florida Office of Insurance Regulation |
| Texas | 100% (Total Loss Formula) | Texas Department of Insurance |
| New York | 75% | New York State Department of Financial Services |
| Illinois | 70% | Illinois Department of Insurance |
| Colorado | 100% (Total Loss Formula) | Colorado Division of Insurance |
| Georgia | Total Loss Formula | Georgia Office of Insurance and Safety Fire Commissioner |
| Ohio | Total Loss Formula | Ohio Department of Insurance |
| Pennsylvania | Total Loss Formula | Pennsylvania Insurance Department |
