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What Is a Totaled Vehicle?

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If you’ve emerged uninjured from a serious car accident, one of your first questions is almost certainly: Can my vehicle be repaired or is it a total loss? Exactly how much damage is sufficient for a vehicle to be declared a total loss generally depends on a number of variables, such as the age and value of the vehicle, the specific insurance company and state laws.

Clear-cut situations. There are two situations in which there generally is no confusion concerning the decision to declare a vehicle a total loss. If the vehicle cannot be repaired safely, or if the cost of those repairs are more than the vehicle is worth, a total loss is declared. Insurance companies determine how much the vehicle is worth by calculating the actual cash value (ACV) of the vehicle before the accident.

State laws. Every state in the country has a salvage law that spells out when a vehicle is considered a total loss.  In general, whenever the cost to repair the vehicle exceeds a pre-determined percentage of the vehicle’s ACV before the accident, the vehicle is a total loss. So, the question is not simply the amount of the damage but the value of the vehicle. For example, $3,000 in damage to a vehicle valued at $2,800 would mean a total loss. However, that same $3,000 in damage to a newer vehicle valued at $15,000 would not be a total loss.

A number of states use a Total Loss Formula. That involves adding the cost of repairs plus the scrap value of the vehicle and comparing it to the ACV before the accident. For many states, if the percentage hits 75 or 80 percent, the vehicle is a total loss. The Total Loss Formula varies widely from state to state. In Iowa, the formula must only reach 50 percent while in Texas the formula must reach 100 percent.

How ACV is determined. In general, insurance companies will get anywhere from 3 to 5 estimates of the cost to repair a vehicle. The estimates come from the same types of vehicles that are close to both the age and mileage of the damaged vehicle. Many insurers will throw out both the highest and lowest estimates and then average the remaining repair estimates to get the ACV.

Arguing for a higher ACV. Your insurance company will expect you to make arguments for a higher actual cash value amount for your totaled vehicle. That can mean pointing out similar vehicles that sold for higher amounts or features such as an extended warranty and add-ons such as a stereo or entertainment system that were not included when the vehicle was initially purchased. Additionally, 35 states have laws requiring insurance companies to reimburse the cost for tax, title and insurance.

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