What are the two methods for an insurer to settle a total loss?

The two methods for an insurer to settle a total loss primarily involve either providing a cash settlement or arranging for vehicle replacement.

In a cash settlement, the insurance company will assess the value of the total loss vehicle, often using industry standards and valuations, and provide a payout to the policyholder equivalent to that value. This approach allows the insured to take the payout and use it towards purchasing another vehicle or addressing other needs.

Vehicle replacement, on the other hand, involves the insurer providing a replacement vehicle to the insured. This is typically more common when the vehicle is subject to certain conditions in the policy, such as circumstances involving newer models or specific types of insurance coverage that allow for direct replacement rather than a payout.

Other options presented do not accurately reflect the methods typically used by insurers for settling total loss claims. For instance, a salvage sale refers to selling the damaged vehicle to recover some of its value but is not a direct method for settling with the policyholder. Partial payment and full refund also do not represent recognized methods for resolving total losses in the context of auto insurance. Repair or replace does not apply to total losses, as a total loss scenario indicates that the vehicle is beyond economical repair.