Texas Total Loss Threshold: How It Affects Personal Injury Settlements

You often hear someone say their car was “totaled” in a car accident. It could mean the damage to the vehicle is so bad that the auto insurance company might deem it a total loss. Determining total loss may affect personal injury settlements in various ways, depending on the circumstances.

However, “total loss” might not mean the same thing everywhere in the US. Depending on the state, insurance companies determine total loss based on one of two formulas. One is the simple total loss threshold (TLT), and the other is the total loss formula (TLF).

Suppose you were involved in a negligent car accident in Texas, and your insurance company deems your vehicle a total loss. Since the Texas total loss threshold is set at 100 percent, this means the repair cost of the damage exceeds the actual car value (ACV). 

Similarly, Florida (80 percent) and Iowa (70 percent) also use TLT. In such cases, you must be careful when accepting an insurance settlement. You may be getting less than you need to cover your losses.

Let’s look deeper into the Texas total loss threshold and how it affects personal injury settlements.

Key Takeaways
  • Texas uses the total loss threshold (TLT) to determine the status of your vehicle after an adverse event. These include accidents, natural disasters, theft, and maintenance issues.
  • Insurance companies deem a vehicle a total loss when repairing it will cost more than the car’s actual cash value.
  • The Texas total loss threshold and insurance coverage determine if you will receive proper compensation in a personal injury settlement.

What is a total loss?

Generally, an insurance company declares a total loss when the costs of repairing a car surpass its ACV. For example, replacing your engine because it ran out of oil may cost more than your car’s ACV. 

Car insurance companies consider various factors when assessing total loss. These factors include damage from accidents and natural events such as floods, theft, and maintenance failures. 

Insurance companies typically establish the ACV by calculating the replacement cost minus depreciation, mileage, and wear. The ACV is a dynamic value as it starts going down as soon as the vehicle leaves the dealership. However, most insurance policies use the declared value of a new car for 20 days to calculate ACV without factoring in depreciation.

Calculating depreciation involves establishing the expected lifespan and the remaining percentage of the vehicle’s value. For example, a five-year-old car will have less depreciation than a 10-year-old with the same model and condition.

Pro Tip

Computing the ACV requires factoring in depreciation, which can be tricky to determine. You can use ACV calculators for cars, such as Kelley Blue Book’s online tool.

What is the actual cash value?

The basis for total loss determination is the actual cash value or ACV, so it is essential to understand what it is. Additionally, the ACV can help you determine the coverage you need and the premiums you must pay. If your policy exceeds the vehicle’s ACV, you might be paying more than necessary. Generally, you want to keep your annual insurance rates around 10 percent of your vehicle’s ACV.

When it comes to insurance claims, the ACV represents the fair market price of the car and how much you will get in a total loss claim. In most cases, insurers place the ACV as the purchase price minus depreciation for the first year of ownership.

ACV vs. replacement cost

You might think ACV equals replacement cost, but they mean different things for insurers. Policies based on ACV will give you the cash equivalent of the totaled car. Replacement cost coverage will replace the insured vehicle with a new one. As you can probably imagine, the premiums for replacement cost coverage will be higher than ACV policies.

ACV factors

Insurance companies use different methods when calculating ACV. However, they typically consider the following factors:

  • Mileage is one of the primary drivers of depreciation. It is the number on your odometer, representing the miles traveled. Putting in more miles means more wear on the vehicle, thus greater depreciation.
  • Make is the vehicle brand, which makes a difference on ACV because some depreciate faster than others. A Toyota Corolla, for instance, has an average 5-year depreciation of 19.8 percent. If you bought a Corolla for $21,700 in 2023, it would depreciate by $4,296 in 2028. 
  • The year refers to the production of the car. Typically, older cars are less expensive, although some vehicles, such as the Porsche 911, have gained value over time.
  • Model is the specific variation of a car make. For example, the make is a 2018 Honda Civic, and the model is a sedan. Other models would be a coupe, hatchback, and convertible. Alternatively, trim variations may include the LX, EX, and Touring. Some models tend to have a higher value than others. You should also know that insurance companies tend to charge more for high-end models with the same coverage.
  • The interior and exterior of a car reflect the level of the car’s maintenance. Dents and upholstery stains can significantly lower the ACV.
  • Location can also affect the ACV because local demand can vary. The most popular model in Texas is the Toyota Camry, while the Ford F-150 sells best in Alabama.

What criteria determine if your car is a total loss?

Determining damage in a Texas car accident involving the insurance company starts with a total loss valuation. Also known as an insurance adjustment, this valuation will factor in the age, condition, mileage, and state law to determine if the vehicle qualifies as a total loss.

Contrary to popular belief, a vehicle does not have to be involved in a crash or look wrecked to be declared a total loss. Flooding, for example, may not leave any visible signs of damage. Still, the vehicle would not be roadworthy without extensive repairs.

Other reasons to warrant a total loss valuation include theft and failure to maintain a car. However, the determination is not automatic. Qualifying as a total loss will ultimately depend on the insurance company’s criteria.

When does an insurance company in Texas total a car?

Liability insurance covers the losses of a third party in case of an accident, such as medical expenses. Texas requires car owners to have minimum liability coverage, but that does not cover the client’s bodily harm or property damage.

You must have comprehensive or collision insurance coverage to qualify for a total loss settlement. Comprehensive insurance covers property damage from events other than a car accident, such as flood or theft. Collision insurance is exclusive to car accidents.

However, Texas is a comparative fault state. You may get compensation for property damage from the other driver’s insurance company if you prove negligence. Consult a car accident attorney in Texas to understand this option.

A total loss in Texas means a car’s ACV is less than or equal to the repair costs. Suppose fixing the damage to a 5-year-old car sustained in a crash in Texas with an ACV of $10,000 costs $10,000. In that case, the insurer may consider it a total loss.

Some states have a lower threshold, typically between 50 and 75 percent. Other states use a total loss formula, which considers the repair costs plus the salvage value of the damaged vehicle.

How much does insurance pay for a totaled car?

The payout for a totaled car depends on several factors. One is the type and amount of coverage you have. Suppose you only have liability insurance required by law. Your insurer will not pay for your damaged car. On the other hand, if you have collision or comprehensive insurance, your settlement will be the ACV of your vehicle.

However, the amount your insurance company pays you may not be enough to repay your loan if you have financed your vehicle. The reason is depreciation, which reduces your vehicle’s ACV over time, so it might be less than the payoff amount. In that case, you may have to pay the difference personally. You can avoid that with gap insurance, which will cover the difference.

In a negligent car accident, you may be able to get compensation from the at-fault party or their insurer. Based on Texas law, you may get as much as $25,000 for property damage. However, you must prove fault to file a claim in court or with the insurer. You may need the help of a personal injury lawyer in Texas to navigate the process.

What happens if the car is deemed a total loss?

Before you can think about a settlement for a totaled car, you must agree with the insurer’s assessment of a total loss. Then, you must surrender your vehicle and keys and complete the necessary paperwork.

After that, the insurer will declare the car a total loss and inform the Texas Department of Motor Vehicles. They will get a salvage vehicle title as part of the settlement, giving them the right to sell the salvage vehicle.  

If you disagree your vehicle is a total loss or the settlement is too low, you or your lawyer can negotiate with the insurance adjuster. You will need supporting evidence that the car is worth more than the insurer has determined. For example, you can provide documents proving you installed high-end modifications to the vehicle that make it more valuable. You can also use photos of the car to show its condition pre-accident to increase its ACV.

How To File a Total Loss Claim

The first step to filing a total loss claim is to contact the insurer. Most insurance companies allow claimants to file on an app, website, or over the phone. They will schedule an insurance adjuster to inspect the vehicle. In most cases, you may not have to be present during the inspection.

The adjuster may communicate before the scheduled inspection to ask some questions and get details. But be careful what you say in a fault state like Texas. It might be best to direct the adjuster to your lawyer.

After the inspection, the adjuster may give you a settlement offer. Suppose your policy covers the rental of a vehicle while you’re waiting for your payout. The adjuster will incorporate that in the quote. You can accept the offer for a quick payout, but most companies will give a lowball offer first.

Check your policy to find out how much you should be getting, or ask around for the fair market value of your car. You might also want to ask your lender for the payoff amount if you finance your vehicle. This information can help you make an informed decision. Your lawyer can negotiate a payout based on these figures. You can take it to court if you can’t agree on compensation.

Suppose you accept the determination of total loss and the settlement offered by the insurer. In that case, you must give your vehicle to the insurance company. Be sure to remove all your belongings before surrendering the vehicle. You will get your compensation through an online transfer or check when you’ve submitted all the paperwork.

Pro Tip

Computing the ACV requires factoring in depreciation, which can be tricky to determine. You can use ACV calculators for cars, such as Kelley Blue Book’s online tool.

Receive Full Compensation for a Car Totaled in Texas

The Texas total loss threshold determines if you can claim a total loss payout. The insurer will usually quote a settlement offer to cover the loss.

However, suppose the total loss insurance settlement is insufficient. You don’t have to accept it. You can pursue a higher payout by negotiating with the insurance company or the at-fault parties.

A personal injury lawsuit is also an option. A totaled vehicle would significantly affect the amount of economic damages.

The Personal Injury Center offers informative articles to help you understand your legal options in car accidents and other personal injury topics. We can also match you with a competent personal injury lawyer to assist in your totaled car claim. Visit the site and book a free consultation today!

Did the damage to your vehicle meet the Texas Total Loss Threshold? Find a car accident lawyer at The Personal Injury Center to get fair compensation for your losses.

FAQs on Texas Total Loss Threshold

Twenty-three states use the total loss formula (TLF) to deem a damaged car a total loss. The formula adds the cost of repairs to the salvage value. If the sum is more than or equal to the vehicle's actual cash value, it is a total loss. The salvage value depends on the percentage of the car's market value the insurance company assigns.

Section 41.001 of the Civil Practice and Remedies Code of Texas specifies what you can claim in a cause of action. It includes damage to property in the recovery of damages.

Yes, but you need to pay for it. Inform the insurance company that you want to keep the vehicle. The insurer will subtract the salvage value of the car from your settlement.