Friday, 07 May 2021 12:04

What Does it Mean to ‘Total’ a Vehicle?

Written by Gary Wickert, Claims Journal


...when to pay a total loss as opposed to paying for repairs to a damaged vehicle. A total loss is not instantly considered salvage and a consolidated reference to a “salvage/total loss vehicle” isn’t always an accurate one.


The subject matter becomes even more complicated when you consider there are 51 different jurisdictions which approach the subject in 51 different ways.


First-Party Total Loss Claims


In insurance parlance, the phrase “Total Loss” in a first-party claim setting simply means that the cost of repairing a vehicle, plus projected supplements, projected diminished resale value and projected rental costs, exceed the Actual Cash Value (ACV) of the pre-accident vehicle less the projected proceeds of selling the damaged vehicle for salvage.


This is known as an “Economic Total Loss.” If the vehicle is badly damaged and beyond repair, it is known as a “Constructive Total Loss.”


To determine the ACV of a vehicle, it is compared to similar vehicles being sold in the area, private databases such as Kelley Blue Book are referenced, or an appraiser is used. To that amount the insurance company sometimes adds sales tax, title and registration fees.


Insurance companies sometimes have their own formulas for determining when to “total” a vehicle. Some do so if a vehicle’s repairs are found to be at 51% of the vehicle’s value, and others use a figure as high as 80%. Much depends on the language of the insurance policy involved.


For example, typical language found in...