When an insurance company considers a vehicle to be a total loss, it is usually because the cost of repairs has reached or exceeded the Total Loss Formula (TLF) figure. This figure is determined when the total cost of damage to the car is close to or greater than its value. Most insurers calculate the sum total of a car when the cost of vehicle repairs plus its residual value is more than the actual cash value of the vehicle. To work out the actual cash value of a vehicle in the event of a total loss, when the claimant chooses to keep the salvage, the definition of real cash value in § 216.6 (b) states that the replacement cost includes sales tax.
The residual value of the insured vehicle is then deducted from its actual cash value. To determine if your car insurance company is offering you a fair settlement, you can calculate both the real cash value and fair market value of your car. An appraiser will use the value of your vehicle just before the accident to decide whether it should be declared a total loss or not. Many auto insurance companies use a percentage of the vehicle's cash value to decide when a total loss of value occurs.
In Illinois, a vehicle is considered a total loss when repair costs plus the value of scrap metal exceed its fair market value before the accident. The repair limit value is calculated by subtracting the scrapping value from the vehicle's fair market value before the accident.