You may hear many unfamiliar words and phrases during the insurance claims process in Florida. Filing a claim after a hurricane, fire, or another covered event can be confusing as a claimant – especially if this is your first time seeking homeowners insurance benefits. One of the phrases you may encounter during a homeowners insurance claim is total loss.

What is a Total Loss?

Total loss means the costs of repairing your home or building are too high. An appraiser has placed the value of your losses at an amount that meets or surpasses the total value of the property, making it a poor financial decision to try to repair the home. When the costs of repairs or rebuilding exceed the pre-event value of a property, it makes more sense to pay the claimant a sum that will allow them to rebuild from the ground up or purchase a new building elsewhere. These cases are total losses.

Rather than paying benefits to repair a total loss, your home insurance company will write you a check for the total value of your policy. According to Florida’s Valued Policy Law, an insurance company lawfully has to pay out a client’s policy limits for a total loss. Florida Statute 627.702 says that in the event of the total loss of an insured building, structure, mobile home, or manufactured building in a covered peril, an insurance company has to pay the property owner the full policy limits, even if this exceeds the appraised value of the property.

What is the Total Loss Test in Florida?

The "Total Loss Test" for homeowners insurance in Florida is a process used to assess whether a property has incurred enough damage that it should be considered a total loss. Unlike automobile insurance, where there is a specific formula or threshold percentage, homeowners insurance claims are evaluated on a case-by-case basis.

Insurance adjusters and companies use a combination of factors to determine whether a property is a total loss:

  • Extent of Damage: The insurance adjuster will assess the extent of the damage to your home. This includes evaluating the structural damage, as well as damage to personal property.

  • Repair or Rebuild Costs: They will calculate the cost to repair or rebuild your home to its pre-loss condition. If the repair costs are so high that it becomes economically unfeasible, or if local building codes require extensive and costly upgrades, the property may be considered a total loss.

  • Insured Value: The insured value of your home, as stated in your insurance policy, plays a significant role. If the cost of repair or rebuilding approaches or exceeds the insured value, it may be more likely to lead to a total loss determination.

  • Local Building Codes: Local building codes and regulations can influence the decision to declare a total loss. If the damage necessitates bringing the property up to code standards, and this is impractical or costly, it might result in a total loss determination.

Determining a total loss for homeowners insurance in Florida is not governed by a single fixed percentage or formula, as is sometimes the case with automobile insurance. Instead, it's based on an evaluation of these factors. Different insurance companies may also have varying policies and approaches to these assessments. Therefore, it's essential to carefully review your policy documents and hire a legal professional who understands how insurance companies handle total loss scenarios and the specific provisions of your policy.

What Happens in the Event of a Total Loss

If your home is declared a total loss, your homeowners' insurance policy provides coverage to help you recover. There are two primary methods of reimbursement:

  • Actual Cash Value (ACV): Under this method, your insurance company calculates the value of your damaged home, considering depreciation. This means you'll receive a payout that reflects the current market value of the property, considering its age and condition.

  • Replacement Cost Value (RCV): Some policies offer RCV coverage, which is more comprehensive. In this case, your insurance provider will cover the cost to rebuild or replace your home with materials of similar kind and quality without factoring in depreciation. This coverage typically results in a higher payout compared to ACV.

What If an Insurance Company Does Not Pay Enough for Your Total Loss?

If your home or building is a total loss, your insurance provider should pay out the full value of your policy under state law. To qualify for insurance benefits, the event that damaged your home must be a covered peril. If you do not have flood insurance, for example, your insurance company may not pay for your damages if a flood caused them. You or your lawyer must be able to prove that a covered peril caused your home’s irreparable damages. If you contributed to the damages in any way, your insurance company may also have grounds to deny benefits.

Assuming you have a valid claim to insurance benefits, your provider should pay out your policy limits. This may or may not match the actual pre-event value of your home or property. If your coverage falls short, you may be out of luck. This is why it is essential to update your homeowners' insurance policy as the value of your home fluctuates. If your insurance company is not treating you fairly, contact our insurance claim lawyerfor advice. We can help you with each stage of your claim after a severe natural disaster causes a total loss.

Has Your Home Insurance Company Denied Or Undervalued Your Property Damage Claim In Florida?

If your insurance company is dragging its feet regarding your property damage claim, you should speak with an experienced insurance claim lawyer as soon as possible. Please contact us online or call our Florida law office at 800.451.6786 to schedule your free consultation. We help Florida residents like you fight the big insurance companies who fail to abide by their policies. Remember, we work on a contingent basis, meaning you don't pay us anything until we win your case. 

K.C. Williams III
Managing Partner who has spent his entire career representing Florida insurance and personal injury claims.