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Friday, 07 May 2021 12:04

What Does it Mean to ‘Total’ a Vehicle?

Written by Gary Wickert, Claims Journal

Index

...NMVTIS with information on every salvage vehicle obtained, including total loss vehicles.

 

The Department of Justice recognizes that many state laws have differing requirements and definitions of terms such as “salvage.” The NMVTIS requirements do not alter these state laws and the state laws do not prevail over federal definitions and requirements.

 

However, as stated in the NMVTIS regulations, a determination of total loss under a state law will trigger the requirement for an insurance company to report a total loss vehicle. The information reported to NMVTIS is not required to be used by any future state that titles a vehicle included in an insurance carrier report.

 

Total Loss Threshold (TLT)

 

In determining whether a vehicle is subject to a state’s salvage title laws, insurance companies will calculate the Total Loss Ratio (cost of repairs/actual cash value) and then compare the resulting ratio/percentage to limits set and/or established by state law. The Total Loss Ratio is also sometimes referred to simply as the damage ratio.

 

Some states have pre-determined percentages which dictate by law how high this damage ratio needs to be in order to be able to declare a vehicle a “total loss” and be eligible for a salvage title or certificate. This is referred to as the Total Loss Threshold (TLT).

 

In order to total a vehicle, the damage ratio must exceed the state-established TLT percentage. States frequently...