Purpose
The Total Loss Payment Explanation letter is used to communicate the valuation and settlement of a vehicle that has been determined to be a total loss. It provides the insured or claimant with a detailed breakdown of how the settlement amount was calculated, including the vehicle's actual cash value (ACV) and any deductions.
When to Send
This letter should be sent once the vehicle valuation is complete and the carrier is ready to issue payment for the total loss. It is typically sent after the insured has agreed to the settlement or as part of the final payment package.
Required Components
1. Vehicle Identification
Identify the vehicle involved in the loss, including the year, make, model, and Vehicle Identification Number: {{vehicle_year}} {{vehicle_make}} {{vehicle_model}} (VIN: {{vehicle_vin}}).2. Factual Basis for Total Loss
Briefly explain the facts of the loss on {{date_of_loss}} and why the vehicle was determined to be a total loss (e.g., repair costs exceed the vehicle's value or the threshold required by state law).3. Valuation Methodology
Cite the source of the valuation (e.g., CCC, Audatex, or independent appraisal) and explain the factors considered in determining the Actual Cash Value ({{vehicle_acv}}), such as mileage, condition, and comparable sales in the local market.4. Policy Provisions
Reference the "Physical Damage" section of the policy ({{policy_number}}), specifically the "Limit of Liability" or "Total Loss" provisions that define how the settlement is calculated.5. Settlement Breakdown & Payment
Provide a clear, itemized breakdown of the settlement:- Actual Cash Value: {{vehicle_acv}}
- Applicable Sales Tax: {{sales_tax}}
- Applicable Fees (Title/Reg): {{title_fees}} / {{registration_fees}}
- Deductible: {{deductible_amount}}
- Prior Unrelated Damage: {{prior_damage_amount}}
- Final Net Payment: {{net_payment_amount}}
Jurisdiction Notes
Universal
While specific state rules vary, most jurisdictions require a written explanation of how a total loss settlement was calculated. Carriers must ensure that the valuation is based on local market data and that all applicable taxes and fees are included as required by law.Adjuster Guidance
- Ensure the valuation report is attached to the letter or provided to the insured.
- Explain any deductions for prior damage clearly, referencing the inspection report.
- Confirm the title status and any lienholder information ({{lienholder_name}})
- If the insured is retaining the salvage, ensure the salvage value ({{salvage_value}})