Great question. The short answer is that insurance companies do “total” houses. Between cars and houses, there are differences in how insurance policies allow for settlement of losses. This contractual difference coupled with the frequency of substantial losses to each line, is likely at the center of why consumers may not have heard of a house being “totaled”. Vehicles:

• Loss settlement Clauses:
• Auto insurance contracts typically pay the Actual Cash Value (ACV) following a loss.
• Actual Cash Value settlement pays the lesser of the:

1. Actual Cash Value -or- (in practice = current market value)
2. The amount necessary to repair or replace with a vehicle of like kind and quality.

• Except for a small percentage of agreed value and stated value policies, physical damage on auto insurance contracts do not state a “limit” of coverage.
• A vehicle is considered “totaled” when:
• The cost to repair the vehicle exceeds it’s Actual Cash Value (market value)

The action of “totaling” a vehicle happens much more frequently than a home. Cars are not stationary and collide with objects or vehicles. This distinction frequently results in the cost of repair being more than the vehicle is worth and the declaration of ‘totaled”.

Houses/Homes:

• Loss settlement provisions:
• Houses can be (and are) insured with a range of loss settlement provisions. Types of loss settlement options found in homeowners policies include:
• Replacement Cost Coverage
• Modified Replacement Cost
• Functional Replacement Cost
• Market Value
• Actual Cash Value ( slightly different application than with auto insurance )
• Regardless of the loss settlement provision, homes are usually insured for a stated limit.
• In practice, a home is effectively “totaled” from the insurance company’s perspective any time the cost to repair is greater than the limit of insurance.
• The land on which a house is built can significantly impact its value.

• Many homes today are insured for their Replacement Cost (or the cost to rebuild) and with an appropriate amount of coverage, most homes can (and are) rebuilt - even if significantly destroyed.
• A total loss to a home is a much less frequent occurrence than with an auto.

Due to generous replacement cost settlement provisions, a much lower frequency of total losses and land values, the occasion where a consumer would consider a home as “totaled” are few. Have more insurance questions? We LOVE to Help - feel welcome to call us at 607-324-7500 This article originally published at Quora.com https://www.quora.com/Why-do-insurance-companies-total-cars-but-not-houses