Posted on November 20th, 2025

What You Should Know

When a vehicle is damaged in an accident, insurance companies must decide whether it’s worth repairing or if it should be declared a total loss. One key factor in this decision is the "total loss threshold"—the point at which the cost of repairs plus salvage value exceeds a certain percentage of the actual cash value (ACV) of the vehicle. This threshold varies by state, and understanding these rules can help vehicle owners better navigate insurance claims and settlements.

What Is a Total Loss Threshold?

The total loss threshold (TLT) is the percentage at which an insurer must declare a vehicle a total loss. If the cost to repair the vehicle (plus the salvage value) meets or exceeds the state’s specified threshold relative to the ACV, the vehicle is considered a total loss. For example, if a state has a 75% threshold and your car is worth $10,000, the insurer may declare it a total loss if repairs cost $7,500 or more.

How Total Loss Thresholds Are Calculated

States use two main methods to determine total loss:

• Percentage Threshold: Many states set a specific percentage (e.g., 75%) of the vehicle’s ACV. If repair costs hit this number, the car is totaled.
• Total Loss Formula (TLF): Other states use a formula: Cost of Repairs + Salvage Value ≥ Actual Cash Value. If the sum meets or exceeds the ACV, the car is totaled.

State-by-State Variations

Total loss thresholds vary widely across the United States:

• Fixed Percentage States: States like Alabama (75%), Louisiana (75%), and Kentucky (75%) use a fixed percentage threshold.
• Formula States: States such as California, Florida, and Texas use the TLF method, allowing for more flexibility based on salvage value and repair costs.
• No Explicit Threshold: Some states, including New York and Hawaii, have no set percentage or formula, leaving the decision to insurer discretion or other regulatory guidance.

Why Does the Threshold Matter?

The total loss threshold affects whether you get a repair or a payout for your vehicle’s ACV. In states with lower thresholds, cars may be totaled more frequently, meaning owners receive payment for the car’s value rather than repairs. In states with higher thresholds or formula methods, vehicles may be repaired even when significantly damaged.

Implications for Vehicle Owners

1. Insurance Settlements: The threshold determines whether you receive a check for your car’s ACV or get it repaired.
2. Title Branding: Totaled vehicles receive a "salvage" or "rebuilt" title, affecting resale value and insurability.
3. Out-of-State Differences: If you move, thresholds may change, impacting future claims.

Tips for Policyholders

• Check your state’s total loss threshold before buying insurance or filing a claim.
• Review your policy for details about total loss determination.
• Understand how salvage titles work in your state.
• Ask your insurer to explain their process for calculating ACV and repair costs.

Conclusion

Understanding total loss thresholds by state is essential for vehicle owners, especially when dealing with accident claims. Thresholds affect whether your car is repaired or replaced, insurance payouts, and your vehicle’s future title status. Always consult your insurer and state regulations for the most accurate information.