A car declared a total loss has not necessarily been destroyed. The decision is an economic comparison, and understanding it explains why lightly damaged cars are sometimes written off.
The comparison is against market value
The insurer weighs the estimated cost of repair against what the vehicle was worth immediately before the damage, not against what the owner paid for it.
If repair approaches or exceeds that value, paying out and taking the wreck is cheaper, and the vehicle is written off regardless of how repairable it is.
Older cars therefore reach that threshold on modest damage, because the denominator has fallen while the cost of parts and labour has not.
Salvage value shifts the threshold
A written-off vehicle still has worth as parts or as a repairable shell, and the insurer recovers some of its payout by selling it.
That recovery is factored in, so the effective threshold sits below the market value rather than at it, which is why the ratio is often set well under a hundred per cent.
Vehicles with strong parts demand have higher salvage value, which counterintuitively makes them slightly more likely to be written off rather than repaired.
Estimates grow once work begins
A visual assessment sees the outer damage, and the true extent only appears once panels come off and the structure beneath is exposed.
Modern bodies use mixed materials and bonded joints, and damage to a structural member can require replacing a large assembly rather than straightening a section.
Sensors, cameras and airbags mounted throughout the body add substantially to the bill, and many require calibration after any structural work.
Some damage is uneconomic to verify
Flood damage and fire damage are treated severely because the harm is distributed through wiring and electronics rather than concentrated where it can be inspected.
Proving a submerged loom is sound costs more than replacing it, and latent corrosion may not appear for a year or more after the event.
Insurers therefore write such vehicles off on principle rather than on the visible state of the bodywork.
Categories follow the vehicle afterwards
Most systems record the severity of a write-off, distinguishing structural damage from vehicles that were merely uneconomic to repair.
Those markers stay attached to the vehicle's history, and they affect whether it may legally return to the road as well as what it is worth if it does.
The categories, their names and the rules for re-registration differ by jurisdiction and are changed from time to time, so a marker means different things in different places.