Total Loss

How does total loss insurance work? A total loss in auto insurance means it costs more to repair a vehicle than what the vehicle is worth. Many states have strict damage limits, and your insurance company determines total loss after an accident by comparing the cost of repairs and a possible rental car against the worth of your vehicle.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years

UPDATED: Oct 30, 2020

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A total loss in auto insurance is a phrase that is applied to the case when an insured vehicle is so badly damaged that it cannot be repaired economically under the terms of the policy. That doesn’t necessarily mean that the vehicle is a complete write off, it just means that the policy’s coverage for the repair bill is less than the cost of the work and the replacement cost of the vehicle (after depreciation has been factored in) at which point the insurer will pay out the replacement vehicle cost under the policy rather than pursue the repair loss

Depending on your coverage the insurance company may also factor into the equation the cost of a rental car, so if your repairs are going to take a long time even if the repair bill is lower than the total loss figure – the costs of providing you with a hire car in the interim, may leave the insurer to decide that it’s not worth pursuing the repair and instead they will pay out the replacement cost of the vehicle.

How Does Total Loss Work?

In some instances (particularly with older models) it may be that the car is not severely damaged when a total loss is applied to it, and while it may be uneconomic for the insurer to pay for repairs the policyholder may choose to pay an additional amount on top of the replacement cost benefit provided by their insurance company, to get it back on the road. In this instance, a government inspection will be required to ensure that the vehicle is restored to good working use, prior to the vehicle returning to the roads. Car owners who choose this route should remember that it is not the government inspector’s job to verify the quality of any repairs undertaken, only to ensure that the vehicle is roadworthy.

Many states have a strictly defined damaged limit that may be applied to cars and other vehicles that are considered to be a total loss. If your vehicle is past this threshold then the state or provincial government will normally require that the vehicle is dismantled at an auto wrecker, broken up for parts or even scrapped entirely. In this instance, the insured party is left with the replacement cost as defined in their policy to purchase a similar vehicle, and they may not attempt to repair the vehicle and return it to road use.

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