Total Loss Insurance in a Nutshell
With over 230 million licensed drivers in the U.S., car insurance is one of the hottest topics. But not everyone knows about total loss car insurance, which can cover your financial losses if your car is totaled as a result of an accident.
If your insured-against-total-loss car is considered a total loss – which can be the case if it cannot be repaired or if the cost of repair is higher than the actual market value of your car – then the insurer will give you a settlement.
What Does It Cover?
It covers for a totaled vehicle, which can be recognized such by an assigned adjusted if:
- The damage meets or exceeds the total loss threshold, which is different in different states: 75% of the car’s market value in Alabama, 100% of, 80% in Missouri, etc.
- The potential spending on the repair exceeds the Total Loss Formula Outcome, which is the fair market value of a car minus its salvage value.
In a nutshell, if you have total loss insurance, you will get paid the full current market value of your car.
How Much Would This Type of Insurance Cost You?
You would have to pay for it about $500 a year. Keep in mind, though, that total loss insurance might be a good choice if your car is your only means of transportation and you couldn’t buy a new one if your current car were totaled.
