How Does the Insurance Company Determine the Value of a Totaled Car?

Your insurance provider uses a special formula to determine your car’s actual cash value and whether it’s repairable or totaled.
Written by Sarah Gray
Edited by Pat Roache
To calculate the value of a
totaled car
, insurers consider several factors beyond the extent of the damage. Luckily, you have some recourse options if you disagree with their valuation.
  • Insurers consider factors like damage, cost of repairs, and salvage value when calculating the cost of a totaled car.
  • Actual cash value, or pre-accident value, is a key determinant in valuing a totaled car.
  • If you disagree with the adjuster's calculations, you have several options to negotiate.

How do insurance companies calculate the value of a totaled car?

Car insurance
companies rely on five primary factors to calculate the value of your car and determine if it’s repairable or a total loss:
  • Type of damage: Mechanical damage is more likely to total a car than cosmetic damage. For example, a vehicle that looks fine may be deemed a total loss if it has a cracked fine, while a bashed-up body with no mechanical damage could be reasonably repaired to before-loss condition.
  • Estimated cost of repairs: A car will be declared a total loss if the cost of
    car repairs
    meets a certain threshold of the car’s pre-accident value—usually 70% to 75%.
  • The vehicle’s age: It gets harder to find replacement parts as a vehicle gets older, and it could be near impossible for a car that’s 10 years or older.
  • Make, model, and trim: A car’s value heavily depends on the make, model, and trim level. If you compare values between different models and trim levels on the Kelley Blue Book's
    What’s My Car Worth
    tool, you’ll see it could be hundreds or thousands of dollars difference.
  • Recoverable costs: Your insurer will calculate your car’s salvage value into the equation as well. Your car has a greater chance of being deemed a total loss car if the insurer can recover more costs by selling it for scrap.
Key Takeaway Total loss value is determined by adding up the cost of the repair and associated costs, the value your car loses due to an accident, and the rental reimbursement costs while your vehicle is down for repairs. Then, the adjuster subtracts the amount they can get for salvaging the vehicle to determine whether to give you a payout or total the car.
Let’s see how an insurance company’s totaled car value calculations work in practice:
  • You wreck your vehicle valued at $10,000.
  • The damage is estimated at $6,000.
  • The accident on your vehicle history report diminishes your car’s value by $1,000.
  • You’ll need a rental for 40 days while the shop completes repairs. At $35 per day, that’s $1,400.
  • If declared a total loss, the insurer estimates they can get $900 at auction as salvage.
  • The balance ends up at a $7,500 loss or 75 percent of the vehicle’s pre-accident value. 
  • There’s a good chance your provider will declare your car a total loss.
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How does insurance determine the totaled car value?

To determine a totaled car’s pre-accident value, or actual cash value (ACV), an insurer considers:
  • Purchase price
  • Depreciation
  • Mileage
  • Your car’s condition
For example: If your vehicle was worth $20,000 when you purchased it and has depreciated by 20% due to mileage and wear and tear, then the actual cash value is $16,000. This would be the amount your car insurance would pay out if it’s marked a total loss. 
Car insurance companies use internal databases and software to determine this value. However, to get an idea of your vehicle’s value, you can look at sites like
Kelley Blue Book
or Edmunds.

What can you do if you don’t agree with the totaled car value?

If you disagree with your insurer's totaled car value calculation, you have several options to negotiate a better payout:
  • Talk to your adjuster: Thorough documentation and open communication may help you
    negotiate a better settlement with your claims adjuster
  • Get an independent appraisal: You may be able to use it to negotiate a better settlement.
  • Have a local governing body investigate: A state-appointed representative will determine if you’ve received a fair appraisal from your insurer.
  • Enlist an arbitrator: Have a third party help settle the dispute.
  • Take legal action: You may be able to sue for a more accurate settlement.
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