Updated: July 3, 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 be used to 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 just because they wrecked their vehicle, insurance companies will deem it a total loss. Even though this may be true in some cases, insurance companies have a precise definition of the word totaled. The literal meaning of the word is when something is damaged beyond repair.
That doesn’t mean that your car must look as if it’s been destroyed. 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; instead, they'll run the numbers. Insurers use one of two main methods to make this decision, depending on the state you live in: the total loss formula (TLF) or the total loss threshold (TLT).
Take a look at the table below to see whether your state follows TLF or TLT. Total loss thresholds are set by individual states and may change. 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:
Formula:
ACV = Original Price − Depreciation
Even if your car seems “almost new,” depreciation starts the moment 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.
A total of 30 states use the Total Loss Threshold (TLT), which sets a percentage point where a vehicle is declared totaled. If the repair costs meet or exceed this threshold, which can be between 60% to 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 agree with your insurer’s decision declaring your car a total loss, you will be required to remove all personal belongings from the vehicle, including the license plate. You will also need to hand over your car and keys to the insurer and complete the necessary paperwork. Once this process is complete, the vehicle will be declared as salvage. |
You disagree that your car is a total loss. | If you disagree with your insurance company’s decision, you can negotiate with your claims adjuster. You’ll need to prove that your car is worth more than what was determined and provide supporting documentation. One way to do this is to highlight any modifications to the vehicle that weren’t considered in its ACV and provide proof of these modifications. |
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 your vehicle.
You may disagree with your insurer’s decision if you feel the settlement amount offered is lower than what your car was worth. In this case, 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 previous condition of the car 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 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, company website, or 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 answer 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.
At this point, 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 some paperwork in person or electronically to officially give up ownership of your vehicle. Once this process is complete, you’ll receive your settlement amount through the agreed mode, typically by check or a 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 happen to total your car while you're still financing or leasing it, its ACV could be lower than your loan balance. Having gap insurance as part of your coverage 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, keep in mind that 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.
If an accident causes significant damage to your vehicle and renders it beyond repair, your insurance provider may deem it a total loss. In this article, we defined Actual Total Loss and its importance during the car insurance claims process. Insurance companies use a total loss threshold (TLT) or a total loss formula (TLF) to determine if a car is totaled, which affects your compensation and options for replacing your vehicle.
Below are answers to common questions about actual total loss, including how it's determined and what it means for your car insurance:
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 rigorous editing process also includes the in-depth analysis of financial topics and linking reputable sources whenever used. Rest assured that 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 side-by-side 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.
