What is Total Loss?
When a vehicle is damaged to the extent that the cost of repairs exceeds the vehicle's actual cash value, or when the vehicle cannot be safely repaired.
Understanding Total Loss
Insurance companies use different thresholds (typically 70-100% of vehicle value) to determine total loss. When totaled, the insurer pays the actual cash value minus any deductible. Gap insurance can cover the difference between ACV and loan balance.
Examples
- 1Older car with $5,000 value needing $4,500 in repairs
- 2Vehicle with frame damage that cannot be safely repaired
- 3Flood-damaged car with extensive electrical problems
Related Terms
Diminished Value
The reduction in a vehicle's market value after it has been damaged in an accident and repaired, compared to a similar vehicle that was never damaged.
Uninsured Motorist Coverage
Insurance coverage that protects you if you're injured by a driver who has no liability insurance or insufficient coverage to pay for your damages.
No-Fault Insurance
An auto insurance system where each driver's own insurance pays for their medical expenses and lost wages regardless of who caused the accident.
Bad Faith Insurance
When an insurance company unreasonably denies, delays, or underpays a valid claim, or fails to properly investigate or defend its insured.
Subrogation
The right of an insurance company to pursue a third party who caused the loss to recover the amount paid on a claim.
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