- What is a totaled car?
- When is a car considered totaled?
- How does insurance determine if a car is totaled?
- How is your totaled vehicle covered on your policy?
- How can I get a new car after a total loss?
- Does car insurance cover sales tax after a total loss?
- Total loss car insurance settlements and sales tax by state
- Totaled car insurance: FAQs
What is a totaled car?
A totaled car has sustained damage to the point where fixing it is more expensive than replacing it. However, not all totaled cars are undrivable. Superficial hail damage won’t affect a vehicle’s drivability, but repairing it may be prohibitively expensive. In some cases, it’s the technology that causes a car to be totaled.
“There is an increase in totaled vehicles these days because so many of the components on the car are very costly to replace. For example, many modern car bumpers now contain sensors and cameras, so it's not just replacing this simple component any longer; the onboard technology needs to also be replaced and calibrated,” says Kathleen Long, CRO at Repair Pal, a consumer auto repair resource.
While it's possible to retain a totaled car if the damage isn’t severe, selling the vehicle later can be problematic, as it will require a salvage title. That will significantly reduce the resale value and make it less appealing to potential buyers.
When is a car considered totaled?
State law determines the threshold for totaling a vehicle based on how much it will cost to repair. Typically, this ranges from 50% to 100% of its pre-crash value. However, insurance companies may declare a vehicle totaled even if the damage is less extensive.
“Nearly any time any major mechanical repair is involved in the repairs needed, the car will be totaled as opposed to repaired, as this almost always represents a significant increase in cost for the insurer,” Long says.
Your carrierAn insurance carrier is the company that provides your car insurance policy and pays claims. may decide your damaged car is a total loss if:
- It can't be repaired safely.
- Repairs would cost more than the car is worth.
- It meets your state's total loss threshold. Many states use a total loss formula (TLF), whereby the cost of repairs plus the car's scrap value must equal or exceed the car's pre-accident value.
Below, you'll see total loss formulas and the total loss threshold by state.
| State | Rule | What you should know |
|---|---|---|
| ALABAMA | 75% | The vehicle is considered a total loss if the damage is greater than 75% of its fair retail value prior to damage. |
| ALASKA | Total Loss Formula (TLF) | The car is considered a total loss if the cost of repairing damage to the vehicle exceeds the vehicle’s worth or insured value. |
| ARIZONA | Total Loss Formula (TLF) | The insurer determines if it is uneconomical to repair the vehicle. |
| ARKANSAS | 70% | Considered total loss if damage to the vehicle is greater than 70% of fair retail value prior to damage or the vehicle is water damaged. |
| CALIFORNIA | Total Loss Formula (TLF) | A vehicle is a total loss when the cost of repair exceeds the vehicle's value before the repair. |
| COLORADO | 100% | Cost of repairing the vehicle exceeds the retail fair market value. Retail value is determined by sources accepted by the insurance industry. |
| CONNECTICUT | Total Loss Formula (TLF) | The cost of repair exceeds fair retail market value. Insurers must use NADA** average and one additional approved source. |
| DELAWARE | Total Loss Formula (TLF) | The insurer determines if the vehicle is a total loss. |
| DISTRICT OF COLUMBIA | 75% | Damage to the vehicle exceeds 75% of retail value prior to the damage. |
| FLORIDA | The insurer determines whether the vehicle is a total loss. | The insurance company can declare your vehicle a total loss if they think it’s cheaper to do so than to repair it. If you and the insurance company agree to repair the vehicle instead of replacing it, it won't be considered a total loss. However, if the repair costs exceed 100% of the car's value, it must be labeled as a "Total Loss Vehicle." |
| GEORGIA | Total Loss Formula (TLF) | Vehicle is damaged to the extent that its restoration to an operable condition requires replacing two or more major component parts. |
| HAWAII | Total Loss Formula (TLF) | The insurer determines if a vehicle is repairable or a total loss. The vehicle must have material damage to its frame, unitized structure, or suspension system, and the cost of repairing the damage must exceed market value. |
| IDAHO | Total Loss Formula (TLF) | The cost of parts and labor minus the salvage value makes it uneconomical to repair or rebuild. |
| ILLINOIS | Total Loss Formula (TLF) | The insurer determines when a vehicle is a total loss. Must not be from hail damage or a vehicle that is nine model years or older. |
| INDIANA | 70% | The cost to repair the vehicle is greater than 70% of fair market value prior to damage or the insurer determines it is impractical to repair and makes a total loss payment. |
| IOWA | 50% | Damage disclosure requirements kick in at 50%. If the cost to repair the vehicle is greater than 50% of ACV then the vehicle must have a damage disclosure on the title and it becomes "wrecked or salvage vehicle." |
| KANSAS | 75% | The cost to repair the vehicle is 75% more than the fair market value at the time immediately before it was wrecked. |
| KENTUCKY | 75% | The cost of parts and labor to rebuild the vehicle to pre-accident condition exceeds 75% as set forth in NADA** price guide. |
| LOUISIANA | 75% | Damage equivalent to 75% or more of the market value as determined by NADA**. |
| MAINE | Total Loss Formula (TLF) | The vehicle is salvaged when the insurer declares it a total loss or a salvage title is issued. The owner transfers the vehicle to the insurer due to damage or the owner determines it has no marketable value. |
| MARYLAND | 75% | Cost to repair the vehicle exceeds 75% of the fair market value. |
| MASSACHUSETTS | Total Loss Formula (TLF) | The insurer determines if it is uneconomical to repair the vehicle and the vehicle is not repaired. |
| MICHIGAN | 75% | If the cost of repair, including parts and labor, is between 75% and 91% of the actual cash value, then a salvage title is given. |
| MINNESOTA | 80% | Damage to late-model vehicles (newer than six years old) or high-value vehicles (over $5,000) exceeds 80% of their actual cash value. |
| MISSISSIPPI | Total Loss Formula (TLF) | The vehicle cannot be more than 10 years old, have a value of less than $1,500, or damage that requires replacement of five or few minor components. Also, applies to a vehicle that requires the replacement of more than five minor component parts according to the insurer. |
| MISSOURI | 80% | Vehicle less than 6 years old and if damage exceeds 80% of the fair market value. |
| MONTANA | Total Loss Formula (TLF) | The insurer determines if the vehicle is a total loss. It is a salvage vehicle if the insurer decides it is uneconomical to repair, considering parts and labor. |
| NEBRASKA | 75% | Late-model vehicle damage exceeds 75% of the retail value at the time it was wrecked, damaged, or destroyed. "Late model vehicle" means a vehicle that has (a) a manufacturer's model year designation of, or later than, the year in which the vehicle was wrecked, damaged, or destroyed or any of the six preceding years. |
| NEVADA | 65% | Vehicle damage exceeds 65% of the fair market value. |
| NEW HAMPSHIRE | 75% | Cost for vehicle repair is 75% or more of its fair market value prior to being damaged. |
| NEW JERSEY | Total Loss Formula (TLF) | The insurer determines if it is "economically impractical" to repair the vehicle or cost of repairs is higher than the market value of the vehicle. |
| NEW MEXICO | Total Loss Formula (TLF) | The insurer determines if it is uneconomical to repair vehicle. |
| NEW YORK | 75% | The cost to repair the vehicle is 75% or more of retail value prior to being damaged by a nationally recognized compilation of retail values. |
| NORTH CAROLINA | 75% | The cost of vehicle repair is 75% or more of its fair market value prior to being damaged. |
| NORTH DAKOTA | 75% | Vehicle damage exceeds 75% of the retail value of the vehicle determined by NADA**. Glass and hail damage are excluded. |
| OHIO | Total Loss Formula (TLF) | The insurer determines if it is economically impractical to repair the vehicle. |
| OKLAHOMA | 60% | The cost to repair damage to the vehicle exceeds 60% of fair market value. |
| OREGON | 80% | Damage to vehicle is equal to or more than 80% of retail market value. |
| PENNSYLVANIA | Total Loss Formula (TLF) | The extent of repairs to the vehicle would exceed the value of the repaired vehicle. Doesn’t include antique or classic cars. |
| RHODE ISLAND | Total Loss Formula (TLF) | The insurer decides if a vehicle is totaled, there are two classifications, A and B. A is the vehicle is good for parts only and B is the vehicle is repairable. |
| SOUTH CAROLINA | 75% | The cost of repairing the vehicle exceeds 75% of the fair market value of the vehicle. |
| SOUTH DAKOTA | Total Loss Formula (TLF) | Insurer or self-insurer determines a total loss. |
| TENNESSEE | 75% | Damage to vehicle equal to or more than 75% of retail market value as determined by current published retail costs. |
| TEXAS | 100% | If the total cost of repairs exceeds the ACV of the vehicle, then it is a salvage vehicle. |
| UTAH | Total Loss Formula (TLF) | Insurer makes the decision whether a vehicle is declared a non-repairable vehicle. Or, two or more major components suffer major damage. |
| VERMONT | Total Loss Formula (TLF) | Insurer makes the decision whether a vehicle (less than 10 years old) is declared a total loss. |
| VIRGINIA | 75% | The cost to repair late model vehicle exceeds 75% of ACV prior to the vehicle being damaged, then the vehicle is issued a non-repairable certificate or a salvage certificate. |
| WASHINGTON | Total Loss Formula (TLF) | The insurer determines whether the cost of parts and labor plus salvage value has made it uneconomical to repair and the vehicle is more than 6 years old. |
| WEST VIRGINIA | 75% | The cost to repair the vehicle is greater than 75% of the market value determined by a nationally accepted used car value guide. |
| WISCONSIN | 70% | Damage exceeding 70% of fair market value will render a vehicle less than seven model years old a salvage vehicle. |
| WYOMING | 75% | For the vehicle to be in pre-accident condition, labor to rebuild and parts exceed 75% of the ACV of the vehicle. |
*Fair market valueThe price at which property would change hands between a willing buyer and a willing seller, where both parties have reasonable knowledge of the relevant facts and neither party is under any compulsion to buy or sell.
**National Automobile Dealers Association
How does insurance determine if a car is totaled?
Your insurance adjuster will determine if the car is totaled by noting the mileage and the condition of the exterior, interior and tires, as well as any aftermarket parts or custom equipment you've added. Then, based on the pre-crash condition of your car, your adjuster will find similar models for sale in your area and establish the total loss estimate on these comparable cars. This is called the actual cash valueActual Cash Value (ACV) is the current market value of your car, considering depreciation. It's the amount your insurance will pay if your car is totaled or stolen. (ACV) of your vehicle.
This amount will then be compared to the estimated cost of repairs to determine if the vehicle is a total loss.
How is your totaled vehicle covered on your policy?
If your vehicle was damaged in an accident caused by another driver, that driver’s liability insurance will cover the damage to your car. However, you will need collision insurance if the damage resulted from an at-fault accident and comprehensive insurance for losses caused by something other than a crash, such as theft, flooding or hitting a deer.
Drivers with minimum coverage must pay for a vehicle replacement out of pocket because their insurance doesn’t include collision and comprehensive coverage.
How can I get a new car after a total loss?
If your insurer decides the car is totaled, it will issue a settlement for its fair market value, which is determined by factors such as age, model, make, and condition, minus your deductible. While the settlement probably won’t cover the full cost of a new car, you can use it to offset the expense.
Keep in mind that if you have a car loan, your settlement will go to pay the loan off first. You’ll need to check with your lender to see if you have a balance due and must pay off the loan before buying a new car. Many lenders require car owners to carry gap insurance because the actual cash value of a vehicle may be less than what you owe on the loan. Gap coverage will pay the difference between what you owe and the insurance settlement if your car is a total loss.
“One thing car owners can do to make sure they are better protected by their insurance is to make sure that they have coverage which will pay off their existing loan and adequately cover the cost of a new vehicle, as this is going to ensure they aren't left with no car and a remaining car loan debt in the event a collision occurs,” Long says.
Does car insurance cover sales tax after a total loss?
Most states require insurers to pay sales tax after you replace your crashed vehic le.
Insurance companies will provide that money for states that reimburse sales tax on the total loss settlement for your original vehicle, not your new car. Here's an example:
Your car is totaled, and you get $5,000 from your insurer. If you buy a car worth $30,000, your auto insurance company will pay the sales tax on the older vehicle, typically 5% to 9%, depending on the state.
If you're in a state that requires insurance companies to pay for those costs, make sure to request the money quickly. Some states also have a 30-day time limit for you to request that reimbursement.
Total loss car insurance settlements and sales tax by state
State law varies regarding sales tax and insurance settlements. Here are 10 examples from Matthiesen, Wickert & Lehrer, S.C., an insurance law firm based in Hartford, Wisconsin:
| State | State laws |
|---|---|
| Arizona | All insurance policies must make prompt, fair, and equitable settlements applicable to both first- and third-party total loss claims. |
| California | Insurer must offer a cash settlement based upon the actual cost of a 'comparable auto,' including all applicable taxes and other fees, or offer a replacement comparable auto including all applicable taxes, license fees, and other fees. |
| Florida | When the insurance policy provides for the adjustment and settlement of first-party auto total losses on the basis of ACV or replacement with another of like kind and quality, the insurer must pay sales tax. |
| Illinois | Insurer must offer a cash settlement based upon the ACV of a 'comparable auto.' If, within 30 days, the insured buys or leases a new vehicle, the carrier must pay the applicable sales tax, transfer, and title fees in an amount equivalent to the value of the total loss vehicle or offer a replacement comparable auto, including all applicable taxes, license fees, and other fees; if the insured purchases a vehicle with a market value less than the amount previously settled upon, the company must pay only the amount of sales tax actually incurred and include transfer and title fees. |
| Kansas | Insurers have an obligation to pay sales tax and fees for all total loss claims. |
| Massachusetts | Insurer is only required to pay for the ACV of a vehicle as of the day of the loss, not the cost to replace it. |
| New York | Insurer is required to reimburse the insured with the ACV. This means either repairing the damaged item or replacing it with an item substantially identical, including sales tax. |
| Pennsylvania | A total loss is settled based upon the pre-loss fair market value of the damaged vehicle plus the state sales tax on the cost of a replacement vehicle. |
| Texas | Motor vehicle sale and use tax is not due when an insurer takes title to the vehicle as a result of a total loss. However, motor vehicle sale and use tax is due when the insurer purchases a replacement vehicle for the insured on a total loss claim. |
| Virginia | Insurers are only required to reimburse for sales tax, title fees, and transfer fees in third-party claims if the policy so requires. |
Some states don't have any such statutes, including Idaho, Michigan, Montana, New Hampshire, New Mexico, North Carolina, North Dakota, Wisconsin, and Wyoming. Some of these states don't have sales tax. Most auto insurance policies limit an insurer's liability to the car's ACV or the cost to repair or replace it. So, if you're in a state without a statute, you may not get help with sales tax.
Talk to the insurance adjuster about your state's laws if your insurer totals your car.
Totaled car insurance: FAQs
Is it better to have a car totaled or repaired?
If your vehicle has significant damage, it may be better to have it totaled. Although totaling a car requires finding a replacement, repair costs and possible safety issues may make keeping your totaled vehicle problematic. Additionally, insuring a totaled car may be more challenging, and you may not be able to sell the car for as much as if the vehicle hadn’t been wrecked.
However, if the vehicle is older and only has cosmetic damage, you may choose to keep it.
If a car has frame damage, is it totaled?
An insurance company will typically total a vehicle if it has frame damage due to the significant repair costs. However, your insurer will determine if your car is totaled on a case-by-case basis.
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