Total Loss
What Does Total Loss Mean?
In the context of insurance, when a property or asset is destroyed beyond repair and holds no remaining value, it is termed a total loss. Since the purpose of insurance is to restore the claimant to their pre-loss condition, the policyholder is reimbursed an amount equivalent to the insured property’s value, subject to coverage limits and claim validity.
Insuranceopedia Explains Total Loss
In a car insurance policy, if the policyholder’s car crashes into a barricade and bursts into flames, or suffers any other accident that severely damages it, the insurance company will assess the damage. If the cost of repairing the car to its pre-loss condition exceeds its current market (or book) value, they will declare it a total loss. Generally, when repair costs surpass a certain threshold—such as 80% of the vehicle’s value—it qualifies as a total loss.
Before paying the actual cash value or replacement cost to the policyholder, the insurance company considers factors like the car’s pre-loss condition, age, accident cause, mileage, structural integrity, and any applicable deductions. After the policyholder is compensated for the total loss, or if the car is written off, the title is transferred to the insurance company.
