When your car is declared a total loss, it means that repairing it costs more than it’s worth — or it’s damaged beyond safe repair. This situation can be stressful for any car owner, especially when dealing with insurance claims, banks, and the Land Transportation Office (LTO). But understanding what happens next can help you avoid confusion and make smart decisions.
Here’s a detailed step-by-step guide to what happens when your vehicle is declared a total loss in the Philippines — including how insurance payouts work, what to do about your loan, and what happens to your car’s registration.
Understanding What “Total Loss” Really Means
In the Philippines, your car is considered a total loss when:
- The cost of repairs (including labor and parts) exceeds 75% of your car’s Fair Market Value (FMV) at the time of the incident.
- The vehicle is completely destroyed, unrepairable, or stolen and unrecovered after a certain period (usually 90 days).
Types of total loss
There are different types of total loss, too:
- Actual Total Loss (ATL): The car is beyond repair.
- Constructive Total Loss: Repair costs exceed 75% of the FMV.
- Total Loss Due to Theft: The car remains missing after 90 days.
Common Causes
Your car can be declared a total loss under any of these situations:
- Severe collisions: Major front or side impact accidents.
- Flood damage: Common during typhoon or monsoon season.
- Fire: Due to electrical faults or external fires.
- Theft: When the car remains unrecovered after 90 days.
Financial Settlement and Insurance Payout
When your car is declared a total loss, your insurance company generally compensates you for the car’s current market value, called the sum insured or FMV.
This means:
- You’ll receive your car’s FMV minus the deductible as insurance payout
- The insurance payout first goes to pay your remaining loan balance on your car, in case it is under a loan.
- If the payout is less than what you owe, you’ll need to cover the remaining amount yourself.
What Happens to Your Vehicle and Registration
Once the insurer declares your car a total loss:
- The vehicle’s registration is canceled with the LTO.
- The Certificate of Registration (CR) and Official Receipt (OR) are surrendered to the LTO for cancellation.
- The insurance company reports the total loss and provides a “Description of Motor Vehicle Paid for Total Loss” form to the Insurance Commission within seven (7) days of claim payment.
If the car is sold or disposed of:
- The insurer reports the sale or disposal within seven (7) days to the Insurance Commission.
- If only major parts (like the engine or chassis) are sold, the registration is not transferred; instead, it is surrendered for cancellation.
This reporting process helps prevent illegally rebuilt or “carnapped” vehicles from being registered again.
What You Can Do as the Car Owner
Here’s what to do if your car is declared a total loss:
Step 1. Contact your insurance company immediately.
Start your claim process right away after the accident, flood, or theft.
Step 2. Prepare all required documents:
- Police report
- OR/CR and proof of ownership
- Photos and damage reports
- Loan documents (if applicable)
Step 3. Coordinate with your bank or lender if your car is still under financing.
Ask about your outstanding balance.
Step 4. Review the damage report and FMV calculation.
You can request a second opinion if you disagree with the assessment.
Step 5. Decide what to do with the vehicle:
- Keep it (if repairable and allowed)
- Sell it for parts
- Let the insurer handle the disposal
Step 6. Sign the release documents only when you agree with the payout.
Step 7. Ask about salvage buy-back options if you want to keep the car for parts or personal use.
How to Avoid Delays in Total Loss Claims
To make your claim process smoother:
- Submit complete and accurate documents right away.
- Cooperate with your insurer’s appraiser or adjuster.
- Stay reachable for inspections or clarifications.
- Follow up regularly to monitor the status of your claim.
Know What to Expect and What to Do Next
If your car is ever declared a total loss, it doesn’t mean the end of the road—it means moving on wisely. The insurance company will pay you the car’s market value, cancel your vehicle’s registration with the LTO, and handle disposal or sale. Knowing this helps you stay calm, avoid financial surprises, and make informed choices after an unfortunate event. Watch this video to learn more: