Total Loss Thresholds by State
Last Updated on August 20, 2021
If your vehicle is involved in a serious accident, then it could be a total loss.
Your insurer will declare your vehicle a total loss when the cost of repairing the vehicle exceeds the total loss threshold.
If the value of your vehicle is lower than the cost of repairing your vehicle, then your insurer will declare your car a total loss, then send you a check for the remaining value of the vehicle.
Total loss thresholds vary by state. In some states, the cost of repairing the vehicle must exceed the value of the vehicle to be declared a total loss. In other states, an insurer can declare a total loss when the cost of repairs exceeds just 60% of the value of the vehicle.
Keep reading to discover total loss thresholds by state.
- Method 1) Percentage of Fair Market Value (FMV)
- Method 2) Total Loss Formula (TLF)
- Total Loss Thresholds by State
- Why Total Loss Thresholds Matter
- Why Is My Car a Total Loss?
- What Happens After My Vehicle is Declared a Total Loss?
- Should I Buy Back My Totaled Car?
- Do Rates Increase After a Total Loss Insurance Claim?
- Final Word – Total Loss Thresholds Vary Widely by State
Method 1) Percentage of Fair Market Value (FMV)
Most states set a percentage of fair market value (FMV) as a total loss threshold. The average percentage is around 75%. If the cost of repairing your car exceeds 75% of the fair market value of your car, then your car is considered a total loss.
‘Fair market value’ is defined as the price a buyer would be willing to pay a seller for the vehicle. It’s the approximate value of your vehicle according to current market conditions.
Let’s say you crash your vehicle. The fair market value of your vehicle is $10,000. It will cost $7,600 to repair your vehicle. In this situation, your insurer will declare your car a total loss because the cost of repairing your vehicle ($7,600) exceeds the 75% total loss threshold.
However, if you take your car to a different repair shop and they offer a lower cost of repairs, then your car may drop below the total loss threshold. If a different repair shop offers to repair your car for $7,400, then your insurer would pay for repairs because the cost is under the 75% total loss threshold.
Over half of the United States uses percentage of fair market value as a total loss threshold.
Method 2) Total Loss Formula (TLF)
All other states use a total loss formula (TLF) as a total loss threshold. The total loss formula allows insurers to save money by picking the lesser of two expenses.
Here’s how the total loss formula works:
- Fair Market Value – Salvage Value = Total loss threshold
If the FMV of your vehicle is $10,000 and the salvage value is $3,000, then you have a total loss threshold of $7,000. If repairs exceed this threshold, then your car is declared a total loss. If repairs are under this threshold, then the insurer will repair your vehicle.
Insurers obtain the salvage value of your vehicle by contacting a salvage yard or contacting local salvagers. Salvaged vehicles are damaged vehicles that have not yet been repaired. Insurers may auction off a totaled vehicle at a salvage auction.
In states that use a total loss formula, insurers may also consider other factors when declaring your car a total loss. Insurers will look at the safety of the vehicle after repairs, for example, the time to complete repairs, the scarcity of the vehicle, the diminished value of the vehicle after repairs, and loss of use while repairs are completed, among other factors.
Total Loss Thresholds by State
- Alabama: 75%
- Alaska: TLF
- Alabama: 75%
- Alaska: TLF
- Arizona: TLF
- Arkansas: 70%
- California: TLF
- Colorado: 100%
- Connecticut: TLF
- Delaware: TLF
- Florida: 80%
- Georgia : TLF
- Hawaii: TLF
- Idaho: TLF
- Illinois: TLF
- Indiana: 70%
- Iowa: 70%
- Kansas: 75%
- Kentucky: 75%
- Louisiana: 75%
- Maine: TLF
- Maryland: 75%
- Massachusetts: TLF
- Michigan: 75%
- Minnesota: 70%
- Mississippi: TLF
- Missouri: 80%
- Montana: TLF
- Nebraska: 75%
- Nevada: 65%
- New Hampshire: 75%
- New Jersey: TLF
- New Mexico: TLF
- New York: 75%
- North Carolina: 75%
- North Dakota: 75%
- Ohio: TLF
- Oklahoma: 60%
- Oregon: 80%
- Pennsylvania: TLF
- Rhode Island: TLF
- South Carolina: 75%
- South Dakota: TLF
- Tennessee: 75%
- Texas: 100%
- Utah: TLF
- Vermont: TLF
- Virginia: 75%
- Washington: TLF
- West Virginia: 75%
- Wisconsin: 70%
- Wyoming: 75%
Why Total Loss Thresholds Matter
The state sets total loss threshold rules for insurers and drivers. Because of these rules, your insurance claim process could vary widely between states.
Let’s say you have a $20,000 vehicle. You get into an accident. It will cost $19,000 to repair that vehicle.
In most states, this situation is considered a total loss because the cost of repairs exceeds the total loss threshold of 80%. However, if you live in Texas or Colorado, then your insurer will pay to repair your vehicle. Texas and Colorado have total loss thresholds of 100%, which means the cost of repairing your vehicle needs to exceed 100% of the value of the vehicle.
Because state laws vary, your car could be salvaged in most states but repairable in others. The state where you live affects how your car insurance claim will proceed.
Why Is My Car a Total Loss?
Many drivers are surprised to discover their vehicle is a total loss after a minor accident. Your vehicle may only have minor damage, yet it’s still considered a total loss. How does that work?
Your insurance company doesn’t care about how much you value your vehicle; instead, they only care about the numbers involving your vehicle. Based on state law, your insurer considers the fair market value of the vehicle, its salvage value, and the cost of repairs. After plugging these numbers into a calculator, the insurer will determine if your car is considered a total loss.
It’s also possible your state has a low total loss threshold. In Oklahoma, for example, the total loss threshold is just 60%. If the cost of repairing your vehicle exceeds 60% of the fair market value of your vehicle, then your car is declared a total loss. Even basic vehicle repairs can cost $5,000 or more, which could quickly break the total loss threshold for a vehicle valued under $10,000.
Iowa, meanwhile, has a total loss threshold of just 50%, which is the lowest in the United States.
What Happens After My Vehicle is Declared a Total Loss?
If your insurer declares your vehicle to be a total loss, then you’ll need to follow certain steps.
First, you can decide whether or not to fight the decision.
If the cost of repairing your vehicle is $25,000 and your vehicle is worth just $6,000, then you’re unlikely to overturn the decision.
However, if the cost of repairs is close to the total loss threshold, then you may be able to challenge the total loss decision. If it costs $7,600 to repair your $10,000 vehicle and you live in a state with a total loss threshold of 75%, then you may be able to challenge the decision (say, by finding a shop with cheaper repair costs or by obtaining a different estimate).
If your vehicle has been declared a total loss and you are not challenging it, then you need to:
- Remove your license plate and all personal items from the vehicle
- Give your keys to your insurance claims adjuster
- Notify the lender (if you are financing or leasing the vehicle)
At this point, your insurer should provide you with a rental car (if the accident was not your vault). Insurers will temporarily cover the cost of renting a vehicle after a covered incident.
Your insurer will also provide you with a check for the value of your vehicle. You can use this check to purchase a new vehicle to replace your old vehicle. Start shopping around. Most insurers cover the cost of renting a car for 30 days before you need to pay for your own rental car coverage.
Should I Buy Back My Totaled Car?
If your car is a total loss, then your insurer takes possession of your vehicle. Insurers run salvage auctions, where they sell damaged vehicles to the public.
After a total loss insurance claim, you can buy back your car at the auction.
Alternatively, most insurers allow you to skip the auction. Your insurer can write you a check for the actual cash value of your vehicle minus your deductible and the salvage value.
You now own your damaged vehicle. You can repair it or keep it for scrap. Because your car has a salvage title, it can be difficult to insure and register – even after you repair it. However, it’s your vehicle to do with as you wish.
Do Rates Increase After a Total Loss Insurance Claim?
A total loss insurance claim will likely raise insurance rates. Most insurers raise rates by 30% to 50% after a single total loss insurance claim, assuming you were at fault for the incident.
Rates should stay elevated for three to five years after the accident, depending on your insurance company and state laws.
If you were not at fault for the incident, then your insurer should not raise your rates.
Final Word – Total Loss Thresholds Vary Widely by State
Total loss thresholds vary widely by state. In some states, insurers can declare your vehicle a total loss when repairs exceed just 50% to 60% of the vehicle’s value. Other states use a total loss formula (TLF) to determine total loss insurance claims.
Contact your insurer and check state laws to verify total loss thresholds in your state.