Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: Apr 14, 2022

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Here's what you need to know...

  • When you have comprehensive and collision on your auto insurance policy, your insurer will pay for the repairs that are needed after covered losses to your vehicle
  • The company is only obligated to pay up to your car’s Actual Cash Value when settling a damage claim. If the damages exceed the car’s value, the car will be declared a total loss
  • Some states have Total Loss Thresholds that allow companies to total a vehicle if the damage only a percentage of the car’s value is exceeded
  • If the car is totaled because there is major structural damage or the repair costs are too high, the company will pay you the car’s depreciated market value, estimated sales tax, registration costs, and title costs for a replacement cost
  • If your car was financed and the vehicle isn’t paid off after the total loss value is paid out, the insurer may pay off the load if you elected to carry GAP insurance

When you file a liability auto insurance claim, you know that your policy is only going to pay up to the limits that you carry for third-party damages.

The Bodily Injury and Property Damage limits are written clear as day on your declarations page and the document shows how much the carrier will pay for medical bills, funeral expenses, and property replacement or repairs.

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Policy documents are very clear when they list your liability coverage limits, but the limits aren’t as clear when it comes to physical damage coverage for your own vehicle.

Since vehicle values change on a regular basis, it can be more difficult to understand how much your policy will pay after a damage loss. Here’s what you need to know:

How much is your carrier obligated to pay when you have a damage loss?


Your auto insurance policy is more than just a document, it’s also a contract. Where there’s a contract there will also be terms and conditions that describe each party’s duties.

The Personal Auto Policy contract will define what is covered, who is covered, what types of expenses are covered, and what is excluded under the policy.

Under Part D: Damage to Your Covered Auto, it clearly states when your car is covered and when it isn’t. It also says how much the policy will pay to repair the car when there is a covered loss and the repairs exceed your deductible.

If you were to review your contract, you would see that the carrier must pay up to the car’s Actual Cash Value when settling a damage claim.

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What is Actual Cash Value?

Since Actual Cash Value is a very broad term, it’s important that you know what it means when you’re settling a comprehensive or collision auto insurance claim.

In the eyes of the insurer, Actual Cash Value is the car’s replacement cost value minus a depreciation charge.

Depreciation charges vary based on a car’s age, condition, and mileage.

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When is a car declared a total loss?

After some losses, the insurance company will determine that the estimated cost to repair the car is more than the car’s Actual Cash Value.

This happens when a car sustains major damage or when the vehicle doesn’t hold much value. If it will cost more to get the vehicle back to its pre-loss condition than it’s worth, the car will be declared a total loss.

Some states have different laws in place that allow insurers to declare a car a total loss even before its Actual Cash Value is exceeded. For this rule to apply, the company must have a Total Loss Threshold defined.

The Total Loss Threshold, or TLT, is the percentage of the Actual Cash Value that must be exceeded before the car is declared salvaged.

How does the company determine what my car is worth?


No adjuster can total a car before they have estimated the car’s Actual Cash Value. This is why one of the first steps to settling a damage claim is to determine the car’s value.

The adjuster assigned to the claim will use several different resources to calculate value. Some of the different data that is used will include:

  • National Automotive Dealer Association used car and new car value guides
  • Kelley Blue Book valuation guides
  • Private party vehicle sales listings
  • Reported sales through local dealers in the policyholder’s area

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How much will the auto insurance carrier pay you when your car is totaled?

After the adjuster has taken the time to review repair estimates and compare them with the car’s valuation report, the company can draft a total loss offer. Your offer for settlement will include a payment for your car and other fees you might not expect.

Here are some of the things that the company will pay for in a total loss settlement check:

  • Actual Cash Value of the car (replacement cost minus depreciation)
  • Estimated sales tax for replacement car
  • Estimated titling costs for replacement car
  • Estimated registration costs for replacement car
  • Towing fees and storage fees incurred because of the loss
  • The salvage value of your vehicle will be deducted from your settlement if you decide to buy it back from the insurance company

Can you negotiate with the insurance adjuster?

Your insurer will try to settle your claim for the lowest possible amount. Since the company wants to stay profitable, they may try to make you a low offer at first to close the claim. This is why you should exercise your right to negotiate the Actual Cash Value of your car if you feel like your offer is low.

The best way to start with negotiations is to tell the adjuster that you feel like the offer is low.

Some agents can add value just because their clients aren’t happy. If you’re still not happy, you should pull up valuation reports on your own. Provide these reports and listings and the value may go up without needing your own appraisal.

Now that you know how much you can expect to receive if and when your car is totaled, it’s up to you to decide if you want to carry full coverage. When you are comparing the premiums for insurance through several carriers, consider the value of your car.

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