What type of damage is considered a total loss?

A vehicle is classified as a total loss when the cost to repair it exceeds its Actual Cash Value (ACV). The ACV is determined by considering factors such as the vehicle's market value, depreciation, and the overall condition prior to the accident. In these cases, it is often not economically sensible to proceed with repairs. Insurance companies evaluate the cost-effectiveness of repairing the vehicle versus declaring it a total loss. If the repair costs are higher than what the vehicle is worth, they opt for the total loss designation, leading to a payout to the owner that reflects the vehicle's ACV. This definition helps ensure that vehicle owners are compensated fairly based on the true value of their vehicle rather than the potentially inflated costs of repair.