How Is Total Loss Value Calculated?

Exactly How Is Your Total Loss Payout Figured?

GIF shows two men in a mechanic's shop with a red car moving into frame. Text reads: "How total loss value is calculated: year, mileage, model, make, physical wear and tear, damage from accident"

The Balance / Michela Buttignol

If you’re in a bad auto accident that causes extensive damage to your car, your insurance company may decide to declare the vehicle a total loss—in other words, that your car is “totaled.” This means that the insurance company has decided it’s not worth the cost to repair it. But what does “not worth it” mean, and what factors are taken into consideration?

Calculating the total loss value of a car is not exactly easy, and it may vary considerably by state and the insurance company. It is important to know how your vehicle's value is calculated because it can help you negotiate for a better payout on your claim. It can also provide info as to why you might not be getting enough money to pay off your loan.

Actual Cash Value

If you could sell your vehicle minutes before your accident, how much money could you get for it? 

Most traditional car insurance policies cover vehicles using actual cash value, deciding it’s not worth repairing your vehicle if the repairs will cost more than a certain percentage of the damaged car’s value. This is generally in the neighborhood of 80%. Exceptions include agreed value policies (usually for classic cars), stated value policies, and additional coverage, such as gap insurance or new car replacement.


Actual cash value is another way of saying what the vehicle is worth at the time of loss. It can be hard to put an exact number on it without some help, but each insurance company has its own way of calculating this value. 

What Factors Determine a Total Loss?

Some things that insurance companies use to determine the actual value and the total loss value of your vehicle are its year, make, model, mileage, physical wear and tear, and damage caused in the accident.

If your vehicle is relatively new and in great condition, it will obviously have a higher actual value than a car that is old and worn out. If your car is a beater, there’s a pretty good chance that your insurance company will determine that it isn’t worth fixing. 

But something to keep in mind is that cars depreciate quickly, and even a relatively minor accident can total an older, less expensive car. For example, if your beloved minivan has an actual cash value of $5,000 at the time of an accident that causes $4,000 worth of damage, it will likely be declared a total loss.

How Much Is Your Vehicle Worth?

Insurance companies use their own proprietary software to calculate the actual cash value of vehicles after an accident. While you probably can't use their software, there are ways that you can get an idea of how much your vehicle is worth.

You can check out the Kelley Blue Book value, or run a search on Edmunds or Auto Trader as a reference. Checking local classified ads is also part of the process. Vehicles for sale which are of similar kind and quality can be used as a base.

But don't get your heart set on the estimated value you find: These resources will only provide a ballpark figure. As almost any claims adjuster will tell you, insurance companies do not pay out claims based on Kelly Blue Book.


Any recent repair receipts you provide are also used to calculate your replacement cost. A new engine, new transmission, or new tires can all make a difference in the size of your check. If you recently replaced an expensive part of your vehicle, that may keep your vehicle from being declared a total loss. 

A Few Words of Caution

Unfortunately, it is not uncommon to receive a total loss payout check lower than your car loan amount. Such a situation can happen for several different reasons:

  • The car is depreciating faster than the rate you are paying down your loan.
  • Extended car loans with rates
  • Wrapping a prior auto loan into your current loan
  • Wrapping other extras such as extended warranties, taxes, and title fees into your loan
  • Little to no down payment auto loans

Avoiding Shortfalls

Gap insurance, which makes up for the difference between what you owe, the car's actual total value, and new car replacement coverage can help you avoid any shortfalls. That will help you combat the depreciation problem.

Paying as much down as possible on your car purchase, along with paying all warranties, taxes, and title fees, will help you limit the amount you owe.