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How can insurance companies decide if a car is totaled?

My friend and I were arguing the other day about how insurance companies decide that a car is totaled. How does it work?

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Will Baldwin · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
A car is considered totaled, or a total loss, if the cost of fixing the car exceeds the car’s value.
In order to figure this out, appraisers will calculate the estimated repair costs. They’ll take into account things like:
  • The cost of replacement parts
  • The car’s salvage value
  • Labor fees associated with repairs
If they determine that fixing the car would cost more than the car was worth before the accident, your insurer will pay you the actual cash value (ACV) of your car instead. The ACV is calculated using certain details about your vehicle, such as:
  • Make
  • Model
  • Mileage
  • Condition (before the accident)
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