Total Loss Series: What Does it Mean When Your Vehicle is Totaled?

Total Loss: Chapter 1 of 6

A vehicle is considered a total loss if it is determined that the cost of repairing the vehicle to make it like-new again is more expensive than the current value of the car.

Understanding Total Loss

You may be at a loss when your insurance agent tells you that your car is now considered a total loss. Looking at it, you estimate it would only be a few thousand dollars to repair, but this is not always true. Even if a car might look okay, there may be structural damage, like a broken frame, that can never be repaired to “good as new status” without costing more than the market value of the vehicle. For example, if you drive a car worth $5,000, and the damage to it will cost $4,000 to repair, the insurance company will choose the total loss option and pay you out. The reason is because they will only pay a certain percentage of the car’s worth when repairing it before they decide that it is simply not worth the effort. It is also not as safe for you.

Considering Fair Market Value

Car accidents can be an extremely emotional experience, but insurance companies work on calculations versus emotions. The sentimental value of cars can sometimes cause owners to think insurance company valuations are off by a large amount, but they usually refer to a buying guide like Kelley Blue Book or NADA. After a collision, your car may look only slightly damaged, but the auto insurance company may still declare the damage extensive and the value of your car a total loss.

Now that you are more familiar with the meaning of a total loss vehicle, read on to learn more about how insurance claims agents calculate total loss figures.

Continue to Chapter 2: Calculating Total Loss >>>