In insurance terminology, what does the term "total loss" mean?

In insurance terminology, "total loss" refers to a situation where a vehicle or property is considered economically unrepairable or effectively lost. This determination is generally made when the cost of repairs exceeds the actual cash value (ACV) of the vehicle or property prior to the loss. Essentially, if the financial burden of repairing the vehicle is greater than its worth, it is classified as a total loss. This means that the insurance company typically pays out the value of the vehicle rather than covering repair costs.

The other definitions provided, such as a vehicle sold for parts only, one that is damaged but repairable, or one requiring only minor repairs, do not fit the criteria for a total loss because they imply that the vehicle still has some value and can be restored to a functional state, and therefore doesn’t reach the threshold of being deemed a total loss.