The first question addressed in your vehicle damage claim is whether the vehicle will be repaired or replaced. A “total loss” occurs when it is less expensive to replace the vehicle than to repair it. Repair costs would include the full cost of all repairs, rental car charges during the course of repairs, and any claim for diminution/loss of fair market value. Total loss / replacement costs would include the fair market value of the vehicle plus the cost of a rental vehicle for a limited period of time. The insurance adjuster who evaluates your vehicle damage will look at the full cost picture, and they legally owe to either repair or replace the vehicle, depending on which is cheaper.
The law forces insurance carriers to handle the claim as a total loss and pay replacement value whenever the estimated cost of all repairs equals or exceeds 75 percent of the fair market value of the vehicle. In these cases, the insurance carrier is legally barred from repairing the vehicle and they must pay the claim as a total loss.
Repair and total loss claims are very different. In the following sections we explore all of the details involved in the insurance claim process for each of these case types.