What Happens If Your House Is a Total Loss?

Posted on May 9, 2022


Long Nguyen | author

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ICHQ | Site Author

Disaster can strike at any time and can lead to serious damage to your property and home. And when it happens, chances are that you’ll want to file an insurance claim with your homeowners insurance to help pay for repairs.

However, what if the damage to your home is so extensive that the projected cost to repair is greater than the entire value of your home? In that case, your property might be declared a total loss. But figuring out whether an otherwise salvageable home has crossed that line can be hard to determine and can lead to headaches and heartbreaks for policyholders.

These complicated claims can be made easier by hiring an experienced insurance claim attorney, like the ones at Insurance Claim HQ. At Insurance Claim HQ, we know the true value of your claim, as well as if you qualify for a total loss insurance claim. Our law firm works with you to ensure you get a fair value for your claim and are able to rebuild the way you deserve.

In this article, we will cover the basics of total loss insurance claims, how your insurance company will calculate your claim’s payout, as well as common problems that may cause issues for those who try to file alone.

What is a Total Loss Insurance Claim?

When the repair and replacement cost of your home is more than the actual value of the home itself—or the home itself is so badly damaged that it’s unsalvageable in any case—then this is considered a total loss.

Total loss cases are not exclusively limited to homes; they can include auto, business, or any other covered policies where the loss exceeds the actual value. However, for total loss coverage to include any personal property inside the home, you will need to check and see if you have separate personal property coverage.

There are two types of total loss insurance claims, which are determined based on the overall loss of your home.

  • Actual loss: When everything in your claim is completely destroyed. For example, when a fire burns a house down to the ground, this would be considered an actual loss.
  • Constructive loss: These claims are when a home is not destroyed, but the repair costs exceed the actual value of the house.

Regardless of what type of loss you may have, it is important to remember that your insurance company will only cover up to your insurance coverage limit. So, be sure to check and update your insurance policy accordingly as your home’s value changes over time.

RELATED: Do You Need an Expert to Determine A Total Loss?

Calculating a Total Loss Using Actual Cash Value

After you submit a total loss insurance claim, most insurance companies determine the severity of your damage in two ways before providing a cash value payment. First, they will begin by investigating the claim itself against your insurance policy. If your insurance coverage qualifies you for a total loss claim, they will move onto step two.

Your insurance company will then determine the cost to repair or replace your property by sending out a variety of experts to survey the damage. These experts, known as estimators, can include general contractors, home insurance adjusters, and even engineers.

If these experts determine the repair and replacement cost is higher than the actual cash value of the home, then your claim will be considered a total loss. Actual cash value is the replacement cost minus depreciation of your home or property at the time of a loss. This number will be used to determine the value of your claim, your replacement cost coverage, and whether your claim is a total loss.

Total Loss Compensation and Insurance Coverage in Louisiana

The challenge of total loss coverage is that the amount of your replacement cost that is covered may vary not only from policy to policy, but from state to state. In Louisiana, if your house is declared a total loss due to a covered event, the insurer is required to pay out 100% of the maximum policy limit.  This means keeping an accurate record of your home’s value and updating your policy limits accordingly is especially important.

The only exception to this rule is if you have signed up for an extended replacement cost policy through your insurance carrier. Extended replacement cost policies offer an extra 25-50% of financial recovery above your home’s coverage limit. Adding this coverage can help you supplement your actual cash value policy if costs to repair are higher than expected, even after getting insurance payments related to your initial coverage.

Common Challenges with Total Loss Claims

The unfortunate reality is that insurance companies are businesses first, and are looking for any way they can avoid paying you the most for your claim. Especially in potential total loss cases, insurance companies will use any trick they can to avoid paying up to the maximum policy limit.

There are a few common issues that claimants typically run into while attempting to file a total loss insurance claim, including:

  • Disagreement over total loss: Insurance companies use their own estimators to give them the upper hand when deciding if you have a total loss. By controlling the story, they can determine your damage is not a total loss even when it is. To prevent this, consider hiring a public adjuster to get an unbiased opinion to use as a defense against unfair claim denials.
  • Claiming non-covered events: Depending on the circumstances, your insurance may claim that the damage to your home was at least partially the result of a non-covered event. For example, if you have property damage from a hurricane resulting in a total loss, the insurance company may argue that the house was primarily totaled by flood damage rather than wind, which may not be covered if you don’t have a separate flood policy.
  • Bad faith: There are many ways that insurance companies can act in bad faith. This can include drawing out the claims process on purpose, offering less than the true value of your claim, ignoring your communications, excessive and unnecessary document requests, or even denying a valid claim without sufficient evidence. Consider hiring a bad faith attorney to fight back against these issues.

Insurance companies are always on the lookout for ways to keep you from the compensation you deserve. If your claim is wrongfully denied for any of these reasons, consider hiring Insurance Claim HQ to help you fight back. We know the tricks insurance companies use and know how hold them accountable. We can help you analyze evidence, communicate with your insurance on your behalf, and even file a lawsuit if they refuse to offer you a fair settlement.

Insurance Claim HQ: Helping Total Loss Insurance Claim Victims Rebuild in Louisiana

When your home is considered a total loss, it can be hard to know where to start. High costs and complicated insurance policies can place serious hardships on victims of property damage.

That’s why Insurance Claim HQ is here to help victims recover and rebuild without the stress of having to fight the insurance company alone. Our team of lawyers are here to make the claims process as smooth as possible for you and your loved ones while ensuring you get the maximum compensation possible for your claim.

If you or a loved one have suffered a total loss of your home, call the experts  at Insurance Claim HQ 24/7 at 864-964-0778 or contact us today to schedule your free consultation.


The content provided here is for informational purposes only and should not be construed as legal advice on any subject.