Friday, 07 May 2021 12:04

What Does it Mean to ‘Total’ a Vehicle?

Written by Gary Wickert, Claims Journal


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Nowhere is the difference between “knowing” something and “understanding” something more evident than when it comes to the relationship between “totaling a vehicle” for insurance purposes and the concept of salvage vehicles under state law.

Everybody knows what it means to “total” a vehicle. But very few people actually understand the relationship between a totaled vehicle and state law regarding when such a vehicle can be titled and driven on public roads.


Because these concepts play a key role in understanding collision losses and subsequent subrogation efforts, we pull back the curtains on these mystical terms in this article.


On April 2, Iowa Gov. Kim Reynolds signed Senate File 230 into law, increasing the damage threshold requirement for a salvage title to 70% of fair market value. This was considered a victory for the Iowa Collision Repair Association, the Iowa Insurance Institute and the American Property Casualty Insurance Association, whose members coalesced in a rare moment of cooperation between insurers and the repair industry.


Repair shops were losing money because so many vehicles were being “totaled.” The previous law defined a “wrecked or salvage vehicle” as one “for which the cost of repair exceeds 50% of the fair market value of the vehicle.”


When and whether a vehicle involved in a collision is considered “totaled” or a “total loss” for first-party insurance claim purposes or for purposes of handling salvage and branding titles of vehicles which are considered “salvage” are two different but related concepts within the insurance industry which are often conflated.


A “total loss” is a function of the insurance policy and the particular insurance company’s practices regarding...

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