When your car is involved in an accident, one of the biggest concerns is whether it will be repaired or deemed a “total loss” by your insurance company. But what does this mean, and how are payouts calculated? This guide will help you understand the process, ensuring you know your rights and what to expect when dealing with insurance claims.

What is a “Total Loss”?

A vehicle is declared a total loss when the cost to repair it exceeds its actual cash value (ACV) or when it is deemed unsafe to drive. Insurance companies use a Total Loss Threshold (TLT) to determine if a car is repairable or if it should be written off.

How Insurers Determine Total Loss

Insurers typically assess a vehicle’s Actual Cash Value (ACV) before the accident. ACV is the car’s market value, considering depreciation, mileage, age, and condition. If repair costs exceed a percentage of the ACV (usually 70-80%, depending on the state), the car is considered totaled.

The Payout Process: How Much Will You Receive?

When your car is declared a total loss, the insurance company will offer a payout based on the ACV of your vehicle before the accident, minus your deductible. Here’s how it works:

  1. Assessment – The insurer evaluates the car’s pre-accident value using valuation tools like Kelley Blue Book and market comparisons.
  2. Deductible Deduction – If you have collision or comprehensive coverage, your deductible will be subtracted from the final payout.
  3. Salvage Value Consideration – If you choose to keep your totaled car, the salvage value (what a junkyard or salvage buyer would pay) is deducted from your settlement.

Example Calculation:

  • Pre-accident ACV: $15,000
  • Repair estimate: $12,000 (80% of ACV, meeting the total loss threshold)
  • Deductible: $500
  • Salvage Value: $2,000 (if you choose to keep the car)
  • Final Payout: $12,500 if you surrender the car, or $10,500 if you keep it.

Your Options After a Total Loss

  1. Accept the Payout & Replace Your Car – Most people take the settlement and buy another vehicle.
  2. Keep the Car & Repair It – If your state allows, you may keep the car and repair it with a salvage title.
  3. Negotiate the Payout – If you believe the insurer undervalued your car, you can provide additional market evidence and request a higher amount.

Factors That Affect Your Payout

  • Vehicle depreciation – Older cars lose value over time, lowering payouts.
  • Modifications – Custom parts may not be fully covered unless added to your policy.
  • State regulations – Some states have different TLTs that impact total loss decisions.

How to Maximize Your Payout

  • Research Your Car’s Value – Use valuation tools like Kelley Blue Book and Edmunds.
  • Gather Maintenance Records – Well-maintained vehicles may have a higher market value.
  • Negotiate with the Insurer – Provide proof of recent repairs, upgrades, or comparable vehicle prices.

Conclusion

Understanding total loss settlements ensures you receive a fair payout from your insurance company. By knowing how ACV is calculated, how deductibles affect settlements, and how to negotiate, you can make informed decisions to protect your financial interests after an accident.

Would you like help finding the best insurance policies to protect yourself in case of a total loss? Let us know in the comments!