Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

Full Bio →

Written by

Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

Full Bio →

Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Feb 1, 2021

Advertiser Disclosure

It’s all about you. We want to help you make the right coverage choices.

Advertiser Disclosure: We strive to help you make confident insurance decisions. Comparison shopping should be easy. We are not affiliated with any one insurance provider and cannot guarantee quotes from any single provider. Our insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance related. We update our site regularly, and all content is reviewed by life insurance experts.

body shop

Insurance Q&A: “How is my car considered a total loss?”

We’ve all heard the phrase, “My car got totaled.”  It typically comes up when someone is explaining extreme damage to their car as the result of an equally horrific accident.

We get it it, it was bad, but what does that mean from an insurance company perspective?  And what can we expect in terms of compensation?

Total Loss? It’s a Simple Formula…

Insurance companies use a simple formula when determining if your vehicle is a “total loss,” or “totaled” as it were.

If the damage to your vehicle costs more to repair than it would cost to write you a check to cover the value, it’s “totaled.”

The good news is that you’ll be compensated from the insurance company, instead of being stuck with a badly damaged car that though repaired, will lose resale value and may wind up a lemon.

Compare Quotes From Top Companies and Save

 Secured with SHA-256 Encryption

Here’s how the process works:

First, the insurance company will determine if your policy includes physical damage coverage assuming the accident was your fault.

If you are not at fault, the other driver will need to be insured with high enough liability limits to pay for the value of your car.

If they do not carry adequate liability limits, you better hope you have either uninsured motorist and/or underinsured motorist coverage.

If the at fault party, either you or the other driver, does not have adequate insurance, the victim is out of luck.

The only hope of recouping losses resulting from the damages would be to sue the other driver.

Good luck getting money from a driver who wasn’t responsible enough to carry insurance in the first place!

Of course, in theory, it’s very easy to complete the process once coverage is verified for the at fault driver.

Let’s look at an example of a total loss:

Value of vehicle: $4,000
Cost to repair: $5,000

(Assumes insurance coverage was in force at the time of the accident)

A vehicle worth $4,000 collides with a tree while swerving to avoid a deer.  Yes, it happens, a lot.

The insurance company gets damage estimates of $5,000 to repair the car.

The insurer would be crazy to pay more than it’s worth in repair bills, so they will consider it a “total loss.”

The insurer will also hold onto your old car once they replace it and probably sell it for scrap to recover some of the money they paid to buy you a new one.