What does “total loss” mean in car insurance?

 What does “total loss” mean in car insurance?

Car Insurance by freepik


"Total loss" in car insurance refers to a situation where the cost of repairing a damaged vehicle exceeds its actual cash value (ACV) or market value. When a vehicle is considered a total loss, it means that the insurance company determines it is not economically feasible to repair the vehicle, and instead, they will compensate the policyholder for the value of the vehicle at the time of the loss.

The determination of a total loss is typically based on a specific threshold set by the insurance company, often a percentage (such as 75% or 80%) of the vehicle's ACV. If the cost of repairs exceeds this threshold, the vehicle is declared a total loss.

When a vehicle is deemed a total loss, the insurance company will typically offer a settlement amount to the policyholder. This settlement is based on the ACV of the vehicle minus any deductible or depreciation, depending on the terms of the insurance policy.

It's important to note that the definition and specific criteria for determining a total loss may vary between insurance companies and jurisdictions. Therefore, it is recommended to review your insurance policy or consult with your insurance provider to understand the specific terms and conditions related to total loss coverage.

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