A vehicle is declared a total loss, or “totaled,” by an insurance company when the cost to repair the damage exceeds a certain threshold of the car’s pre-accident value. This threshold varies by state but frequently hovers around 70-80% of the vehicle’s worth. Even seemingly minor damage can trigger this, for instance, if a late-model car experiences damage to its complex sensor systems, or a classic car has difficulty in source parts and it is expensive to repair.
This practice benefits the insurance company financially. Paying out the actual cash value of the car, minus any deductible, is often less expensive than covering extensive repairs. This approach streamlines claims processing and reduces the risk of further complications associated with ongoing repair work. Furthermore, salvage companies purchase totaled vehicles, allowing insurers to recoup some of their losses, reducing the burden they have to assume.