If the TLT is not dictated by the state, an insurance company will usually default to something known as the Total Loss Formula (TLF) which is: Cost of Repair + Salvage Value > Actual Cash Value. Meanwhile, other states require insurance companies to use a specific formula when calculating total loss. See state car insurance rates and total-loss thresholds. If the settlement is less than what is owed, the insured will be responsible for paying the rest of the loan balance. Project description: Paper cut of family with house and car.