State laws and your insurance company's guidelines dictate how a vehicle is determined to be a total loss. You must have comprehensive insurance coverage for your car to be repaired or replaced after flood damage. You will owe your chosen deductible.
In general a car is determined to be a total loss when:
- It's so severely damaged it cannot be safely repaired.
- It costs more than the worth of the vehicle to repair it.
- Or, if the amount of damage or cost of repairing the vehicle is too much, according to state regulations or the insurer's guidelines for total loss.
Typically, cars are "totaled" when the cost of repairs to fix the vehicle is higher than the vehicle's actual cash value (ACV). However, in some cases, it's not practical to fix a car, even if the cost to do so is less than the ACV. In that case, insurance company guidelines and state laws come into play when determining whether the car is totaled or not.
Insurance companies calculate the “total loss ratio” or “damage ratio” (cost of repairs divided by the actual cash value) when determining whether a car is totaled. This ratio is then compared to limits either set by the company itself or by state law.
Some states dictate how high this damage ratio needs to be to declare a car totaled. This is referred to as the Total Loss Threshold (TLT). To total a car, the total loss ratio must exceed the established TLT percentage. If the TLT is not dictated by the state, your insurance company will generally use another formula, known as the Total Loss Formula (TLF) which is: Cost of Repair + Salvage Value > Actual Cash Value. If the sum of the repair cost and the salvage value is greater than the ACV, the car can be declared a total loss.
Here is an example, provided by CarInsurance Consumer Analyst Penny Gusner, who is available to answer your questions:
A damaged 2007 Toyota Corolla with 105,000 miles in good condition with an approximate value of $5,000. Total repair costs are $3,600, for a damage ratio of 72 percent. This car would be considered a total loss in Indiana, where the TLT is 70 percent, but not in Oregon where the TLT is 80 percent. In California, the TLF would be used and, if the salvage were worth $1,000, the car would not be totaled ($3,600 + $1,000 < $5,000).
These states use the TFL formula and rely on licensed appraisers during the process: California, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Maine, Massachusetts, Mississippi, Montana, New Jersey, New Mexico, Ohio, Pennsylvania, Rhode Island, South Dakota, Utah, Vermont and Washington.
These states have the following TLT threshold mandated by law:
- Alabama 75%
- Arkansas 70%
- Colorado 100%
- Florida 80%
- Indiana 70%
- Iowa 50%
- Kansas 75%
- Kentucky 75%
- Louisiana 75%
- Maryland 75%
- Michigan 75%
- Minnesota 70%
- Missouri 80%
- Nebraska 75%
- Nevada 65%
- New Hampshire 75%
- New York 75%
- North Carolina 75%
- North Dakota 75%
- Oklahoma 60%
- Oregon 80%
- South Carolina 75%
- Tennessee 75%
- Texas 100%
- Virginia 75%
- West Virginia 75%
- Wisconsin 70%
- Wyoming 75%
Gusner said it's worth noting that your car insurance company can have its own internal guidelines that "total" a car, and that may be at a lower threshold than your state's TLT. However, an insurer can't have its own threshold set for a higher amount than the state. "For instance, in Florida the state TLT is 80 percent, but if your insurer's own guidelines say to total a car at 75 percent, they can do that," says Gusner. "But the insurer can't have a TLT at, say, 85 percent because that would be against the law."
Does car insurance cover flood damage?
In some cases, your car insurance may pay for damages when your car sustains water damage and isn't totaled. Here's how the different types of car insurance coverage come into play if you're caught in a flood:
Comprehensive insurance -- If your vehicle sustains water or flood damage, you can file a claim under your comprehensive insurance coverage, which covers any type of damage to your car up to its actual cash value that's caused by natural disasters instead of accidents, says Gusner.
Collision coverage -- Collision comes into play if you hydroplane and flip your car or hit another car or a tree. Your claim will pay to repair your car or will pay the actual cash value of the car. You do still have to pay the deductible, Gusner says, whether the accident was your fault, someone else's or caused by the storm.
Gap insurance -- This type of insurance comes into play if your car is totaled and you owe more money on your car than it's worth -- gap insurance will pay the difference. "For instance, if you owe $15,000 on your car loan but your car is only worth $12,000, gap insurance will reimburse your lender for the extra $3,000," says Gusner. You can get gap insurance from your car insurance company or from your car financing company, but it's usually more expensive from your lender.
Rental car reimbursement -- Depending on your situation, rental reimbursement coverage is a wise choice or a waste, says Gusner. If you have a second car or a way to get where you need to go without your car, you don't need rental coverage, she says. But if you'd be left stranded for weeks while your car is being repaired, it may pay to have it. "Rental reimbursement coverage is optional and pays you a certain amount of money per day or per week for a rental car to drive while your car is being repaired," says Gusner.