How is a car total loss determined?

When determining whether a car is a total loss after an accident, the approach varies from state to state. Two common methods are used: the Total Loss Formula (TLF) and the Total Loss Threshold (TLT).

Total Loss Formula (TLF): This method involves calculating the sum of the car’s repair costs and its salvage value (the estimated value of the car’s remains after an accident). If this combined amount surpasses the actual cash value (ACV) of the car—essentially its market value before the accident—the vehicle is considered a total loss. This formula provides a comprehensive assessment, factoring in both the costs of repairs and the residual value of the car.

Total Loss Threshold (TLT): Total Loss Threshold method sets a predetermined percentage, based on the car’s actual cash value, as the criterion for declaring a vehicle a total loss. States using the TLT method have specific percentages that, if exceeded by repair costs, mandate the car to be declared a total loss. For instance, in Florida, the threshold is set at 80%. This means if the estimated cost of repairing a vehicle exceeds 80% of its market value, it’s considered totaled. However, if repair costs amount to less than 80%, the vehicle is typically repaired.

Understanding the method your state uses is crucial for both vehicle owners and insurance professionals. It can help with anticipating the insurance claims outcomes after an accident. Vehicle owners should be aware of their state’s regulations and how they might impact insurance claims, especially in terms of vehicle valuation and repair versus replacement decisions.