Friday, 07 May 2021 12:04

What Does it Mean to ‘Total’ a Vehicle?

Written by Gary Wickert, Claims Journal


...the insured. If the vehicle is leased, the leasing company is usually paid. If the vehicle is financed and the lender is listed on the policy or on the title, the financing company is usually paid first.


Typically, cars are “totaled” when the cost to repair the vehicle is higher than the ACV of the vehicle. However, it is not always practical to repair a vehicle, even if the cost of repair is less than its ACV.


A vehicle worth $4,000 requiring $3,000 in repairs might be considered “totaled” by an insurer even though the cost of repair is less than its value before the accident. In the case of Iowa, if a car requires a salvage vehicle with repairs at 50% of fair market value, the onus and stigma of obtaining a salvage title usually results in the insurance company treating such claims as total losses anyway.


Insurance companies will typically consider such a vehicle to be a total loss, even though the repairs are only 75% of ACV or pre-damage value, or if the vehicle is stolen and not recovered. The damage threshold varies from company to company.


An insurer will usually take possession of a totaled vehicle and obtain its title. If the owner is OK with the carrier totaling the vehicle but still wants to keep the vehicle, the carrier will pay its insured the ACV of the vehicle, minus any deductible that is due and the amount the vehicle could have been sold for at a salvage yard. It then will be up to the insured to make repairs and take care of any title issues.


Many states like Iowa do not have a statutory correlation between “total loss” claims and “salvage title” requirements. However, in many instances the two do go hand-in-hand because the fact that state law requires a damaged vehicle to obtain a salvage title if repaired often means an insurer will “total” the vehicle anyway.


Total Loss Thresholds, Vehicle Title Branding and Resale of Salvage Vehicles


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