Total Loss Car Insurance

Do you feel safe in the event of a total loss? Let's make sure you do.

Total Loss Car Insurance


Totaling your car is, to put it eloquently, a pretty big bummer. Even if you’re left uninjured, the mess of logistics that follow suit is confusing and stressful during an already stressful time. The actual meaning of total loss, how it’s determined, if you can disagree with its determination, and what comes next are all questions that arise after a vehicle has been totaled, and fortunately, these are the questions we'll answer. Let’s get started.


  1. How is a total loss determined?
  2. Can you disagree with a total loss decision?
  3. What happens if you have a loan on your vehicle?
  4. What’s a salvaged vehicle?
  5. Should you buy a salvaged car?




What is a total loss?


A total loss determination varies by state. Basically, there are two schools of thought: total loss formula states (TLF) and total loss threshold states (TLT). In TLF states, a vehicle is determined to be a total loss if the cost of repairs plus the scrap value of the vehicle is greater or equal to the actual cash value of the vehicle.

In total loss threshold states, outlined here, a vehicle is determined to be totaled if the value of the damages exceeds a certain point. This “threshold” is valued as a percentage and varies a bit between states. Iowa has the lowest threshold, meaning the least dollar amount needed to total the vehicle at 50% where as Texas has the highest at 100%.

The remaining states, Alaska, Arizona, California, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Louisiana, Maryland, Minnesota, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, South Dakota, Utah, Vermont, and Washington are "total loss formula" states.

After you vehicle has sustained a significant loss, your car insurance company will evaulate the vehicle and determine if it's a total loss.





Can you dispute a total loss?


If you feel your insurance company undervalued your vehicle, you have some options that may help.


  1. Request documentation regarding the total loss and look for any inaccuracies
  2. Your insurance company will determine the value of your vehicle as well as the value of the repairs. Make sure the documentation correctly states the mileage, vehicle age, and any additional non-standard features you might have. Next, you’ll want to compare the value listed by your insurance company with other sources. Kelley Blue Book and NADA are good resources for that.


  3. Gather all your paperwork regarding the vehicle such as information from the previous owner, mechanical reports, repairs, upgrades, etc.
  4. This will further help present your side of the argument that the vehicle was undervalued.


  5. Present any inaccuracies to your insurance company
  6. If you're able to find inaccuracies with the report, speak with your car insurance company's claims department or the claims adjustor assigned to you.





Totaling your vehicle when you have a loan


If you’re leasing or financing your vehicle, totaling your vehicle can have major implications. Within you lease agreement, you’re required to maintain the vehicle in near perfect condition. And, as you can imagine, totaling the vehicle falls way outside those lines. Moreover, if you have a loan on the vehicle and the vehicle is totaled, you could find yourself in a situation where you owe more than the vehicle is worth.

Luckily with leased vehicles and sometimes if you’re financing, your agreement often requires you carry gap insurance. Gap insurance is designed for situations where the loan on the vehicle is worth more than what your insurance company will pay you for the total loss. Because of the nature of vehicles, they lose value very quickly. And with most kinds of insurance, you will only be paid the actual cost value of your asset — not what you originally paid for it. So, if your loan is $25k and your vehicle is totaled and your receive $20k because that is what your vehicle is valued at, gap insurance would step in to cover that $5k.

If you do not have gap insurance but Loan/Lease Payoff Coverage, you can also find help. Loan/lease is similar to gap insurance but typically as a coverage cap. So, while gap insurance will cover the difference between what you receive and what you owe, this coverage would only cover a certain percentage of that value. While it can vary by company, Loan/Lease Payoff coverage typically exhausts at 25% of your vehicles value. Because of this, gap insurance is generally considered a more overarching solution to this problem.





What’s a salvaged vehicle?


A salvaged vehicle, otherwise known as a salvage title, is the end result of a total loss. While the exact procedures are governed by your state’s DMV, after a total loss decision by your insurance company your DMV will issue a “salvage certificate.” This will prohibit you or anyone else from driving this vehicle as it has been deemed unsafe for public use.

If you or your insurance company decide to repair the vehicle, get it re-inspected and registered, it will be branded a salvaged or rebuilt vehicle. This does have some insurance implications. Because of the nature of salvaged vehicle titles, lots of insurance companies will flat out deny you coverage. The risk they present, even if they have been rebuilt, is deemed too much for insurance companies.

Your best bet for finding insurance after a salvaged vehicle is to be upfront with your title. This way you don’t waste your time with companies that won’t work with you. An insurance company will find out if the vehicle has been totaled and repaired anyway, so there isn’t much use in withholding this information.





Buying a salvaged vehicle


Salvaged vehicles tend to be a lot cheaper than non-salvaged ones. Because of this, they have a great allure to buyers on a budget. But there are some things you need to consider if you’re going to buy a vehicle that has been salvaged.


Do a VIN check

If a vehicle has been salvaged, it will be listed on the vehicle’s car history report which you can check via the VIN or vehicle identification number. You should do this with any vehicle you're thinking of busying, regardless of the title status.


Get it inspected

Do NOT buy a vehicle that hasn’t been inspected by your preferred mechanic. It’s pretty clear why; you want to ensure all the repairs have been made properly and there aren’t any underlying issues with the vehicle.


Get original total loss declaration or repair information

This will help determine what actually happened to the vehicle to better understand the repairs made in step 2.


Do your own research on the vehicle

If you’ve made it this far with the vehicle, compare the value of the vehicle to what’s listed on NADA or Kelley Blue Book. If you’re buying from an independent buyer, say the former owner, you might be able to negotiate the price. Moreover, do research on the buyer. See if there are any red flags in his or her past concerning selling salvaged vehicles.


Get insurance quotes ahead of time

As long as you have the VIN, you're able to get quotes prior to purchasing the vehicle. As we discussed, getting insurance on a vehicle with a salvaged title can be tricky. In order to legally drive away with the vehicle, you'll need insurance. So plan to get some quotes ahead of time to avoid any issues.


Ready to save?




Total Loss Formula States


If you live in one of the states listed below, a vehicle will be determined a total loss if they value of the repairs is greater than the percentage listed in the right column.


Total Loss Threshold States and Values

State Value needed to Total Loss
Alabama 75%
Arkansas 70%
Colorado 100%
Florida 80%
Indiana 70%
Iowa 75%
Kansas 75%
Kentucky 75%
Maine 75%
Massachusetts 75%
Michigan 70%
Mississippi 80%
Montana 75%
Nebraska 65%
Nevada 50%
Nevada 50%
New Hampshire 75%
New York 75%
North Carolina 75%
North Dakota 75%
Oklahoma 60%
Oregon 80%
South Carolina 75%
Tennessee 75%
Texas 100%
Virginia 75%
West Virginia 75%
Wisconsin 70%
Wyoming 75%

Recent Questions:

Total Loss Car Insurance

Why am I still being charged for a totaled vehicle?

May 03, 2018

I was in an accident. The car was insured and the adjuster said it was totaled. Why do they continue ...

Should I tell my insurance I totaled my car?

May 02, 2018

I was involved in an accident a few weeks ago that totaled my car. Will I benefit in any way ...

Will I get a new car after an accident?

Apr 12, 2018

Okay so I have a 2016 Honda Accord that I was buying from the dealer. I parked it outside of ...

Need to insure a salvaged title in CT

Mar 22, 2018

Can a salvaged title be insured (for liability only) in the State of CT? Car was in a fender bender ...

Additional Resources:

Total Loss Car Insurance

What I Learned After Totaling My Car 450 Miles from Home
What I Learned After Totaling My Car 450 Miles from Home
Jan 03, 2018

This past May, I took a road trip from Rhode Island to West Virginia to attend a friend’s wedding. Despite...

How to File a Car Insurance Claim: Steps, Timing, and Costs to Expect
How to File a Car Insurance Claim: Steps, Timing, and Costs to Expect
Dec 01, 2017

You get in an accident or your car is pummeled with hail. You need to figure out how to get...

How to Safely Handle Unsafe Road Situations
How to Safely Handle Unsafe Road Situations
Jun 29, 2017

What should you do if you’re in a minor accident but it doesn’t feel safe to get out of your...

How Long After a Car Crash Can You File a Claim?
How Long After a Car Crash Can You File a Claim?
Dec 13, 2016

Auto insurance rules aren’t simple: each state sets its own regulations about everything from whether or not a driver’s credit...

Who’s to Blame? Defining “Fault” in an Insurance Scenario
Who’s to Blame? Defining “Fault” in an Insurance Scenario
Sep 07, 2016

To the uninitiated, fault sounds easy enough: it ought to be assigned to the perpetrator of a crash, right? And...

Should You Use the Mechanic Your Insurance Company Recommends?
Should You Use the Mechanic Your Insurance Company Recommends?
Jun 13, 2016

After your car is damaged in a wreck (or vandalism, or a weather event), you’ll document the damage and exchange...

What to Do After a Car Crash
What to Do After a Car Crash
Apr 20, 2016

According to the National Safety Council, there are approximately 10 million car crashes in the U.S. each year, from fender...

The Best Apps for Car Crashes and Emergencies
The Best Apps for Car Crashes and Emergencies
Dec 16, 2015

If you’ve ever been involved in a car crash, you know how difficult it can be to remember each detail...

Hit and Runs: What You Need To Know
Hit and Runs: What You Need To Know
Oct 06, 2015

Some traffic incidents cause heart pounding reactions, like stolen cars, car accidents, and near-misses, but unsurprisingly, hit-and-runs can be one...

Whose Insurance Do You Use After An Accident
Whose Insurance Do You Use After An Accident
Jul 08, 2015

You just got into an accident, but it is not your fault. So whose insurance do you call? Or, a...

AAA vs. Roadside Assistance Coverage: Which is Better?
AAA vs. Roadside Assistance Coverage: Which is Better?
Jun 19, 2015

On your list of car things to square away ahead of time, “What to do when you need a tow”...

Auto Repair: How to Choose a Mechanic
Auto Repair: How to Choose a Mechanic
Jun 04, 2015

Finding a repair shop and mechanic you trust to both fix your car well and not take you for a...

5 Tips for Car Maintenance (From a Real Mechanic)
5 Tips for Car Maintenance (From a Real Mechanic)
Jun 01, 2015

Sure, you can ask your friend’s cousin, or your cousin’s friend, to take a look under the hood and see...

RapidSOS: The App for Emergencies
RapidSOS: The App for Emergencies
Apr 30, 2015

If there’s a need for the accuracy and timeliness of technology, it’s in the case of an emergency. But even...

The A-Word: Is There No Such Thing as a Car “Accident”?
The A-Word: Is There No Such Thing as a Car “Accident”?
Feb 05, 2015

Last Thursday, at 3 p.m. PST in the parking lot of a fast-food restaurant in Los Angeles, Death Row Records...

Parking Lot Hell: Black Friday Accidents
Parking Lot Hell: Black Friday Accidents
Nov 27, 2014

In recent years, Black Friday snafus, arguments, and worse have created more news stories than any of the deals causing...

3 Times You Shouldn’t File a Car Insurance Claim
3 Times You Shouldn’t File a Car Insurance Claim
Nov 13, 2014

Sometimes, after a car accident, it’s obvious that you’ll want to get ahold of your insurance company as quickly as...