Repair vs Total Loss: How Insurers Decide

Quick TL;DR

• Insurers decide repair versus total loss by comparing repair cost plus related expenses to the insured value or replacement cost. Typical thresholds are in the 60 to 75 percent range of value, but exact thresholds vary by carrier and policy language.

• Agreed-value policies pay the agreed amount on total loss, so they change the math. Actual cash value policies introduce depreciation which affects the payout.

• You can influence the decision: document invoices, get multiple repair estimates, provide agreed-value proof, request independent appraisal, and show business continuity costs to argue repair instead of total loss.

Repair vs Total Loss: How Insurers Decide

Executive summary

When a drone crashes the immediate question for operators is simple: can we fix it affordably, or is it a total loss? The insurance answer is not emotional. It is arithmetic and policy law. Insurers compare repair cost, parts availability, safety, and salvage value against the policy values and then apply internal thresholds. 

This article explains the exact factors insurers use, shows realistic calculations, gives tactics to influence decisions, provides sample emails and templates, and finishes with a one-page checklist you can use after any crash. Know this process and you turn a chaotic claim into a predictable business outcome.

The core decision: repair cost vs insured value

Insurers run a basic equation:

1. Calculate the total estimated cost to repair the aircraft. This includes:

   • Parts cost

   • Labor cost for repairs and bench testing

   • Shipping and special import fees for parts

   • Diagnostic and teardown fees if required

2. Compare that sum to either:

   • The agreed value listed on the policy, or

   • The replacement cost or actual cash value (ACV) of the drone

3. Apply the insurer’s total loss threshold. Many insurers total when repair cost exceeds a threshold of the value, commonly 60 to 75 percent. If repair cost is below that threshold, repair is typically authorized. If it exceeds the threshold, insurer may declare total loss.

Example calculation 1

• Agreed value: $10,000

• Repair estimate: $6,800

• 6,800 divided by 10,000 = 0.68 = 68 percent
  If the carrier’s threshold is 70 percent, the carrier might still authorize repair. If the threshold is 60 percent, the carrier is likely to total.

Example calculation 2

• Replacement cost: $15,000

• ACV after depreciation: $11,000

• Repair estimate: $8,500

• 8,500 divided by 11,000 = 77.27 percent
  Carrier likely totals if its threshold is 75 percent.

Be precise when you compare numbers. Small differences matter.

Read: Drone Insurance Exclusions That Kill Claims (With Real Scenarios)

Important variables insurers consider beyond raw cost

1. Agreed value vs ACV

   • Agreed value: payout equals the pre-agreed amount less deductible on total loss. This removes depreciation fights and typically makes total loss payouts larger and cleaner.

   • ACV: payout equals replacement cost minus depreciation. Older drones or custom rigs suffer heavier depreciation and ACV payouts can be disappointing.

2. Salvage value

   • If the insurer totals, they often retain salvage and sell it for parts. Salvage reduces net loss for the insurer. Some policies subtract salvage value from your payout, others let the insurer keep salvage without deduction. Read the policy.

3. Safety and airworthiness

   • If key structural elements or flight control computers are destroyed, rebuild may not restore original airworthiness. Insurers consider whether repairs return the craft to OEM safety standards. If not, they may total for safety reasons.

4. Parts availability and lead time

   • If replacement parts are unobtainable or have long lead times that threaten your business continuity, insurer may prefer to total and pay out so you can buy a replacement faster.

5. Payload and bonded components

   • Expensive detachable payloads scheduled under agreed-value may be totaled separately. A carrier may total payload and repair airframe or vice versa.

6. Repair shop capability and warranty

   • Insurers prefer approved repair shops. If a proposed repairer cannot provide OEM-standard repair reports and test flights, insurer may refuse to authorize repair.

7. Business continuity costs

   • For commercial operators, insurers sometimes factor the cost of downtime, expedited parts, or rental replacement when deciding between repair and total loss. This is more common in commercial fleet policies.

How to influence the decision in your favor

You can actively shape the insurer’s calculus. Do these steps fast.

1. Prepare a full valuation file before insurers finalize the decision:

   • Original purchase invoices and serial numbers

   • Photos of the rig before the loss (if available)

   • Itemized payload schedule and agreed-value endorsements

2. Get multiple repair estimates

   • Obtain at least two detailed line-item estimates from reputable, insurer-preferred shops. Itemize parts, labor hours, and lead times. Clear line items reduce adjuster skepticism.

3. Show OEM or boutique parts pricing

   • Provide vendor invoices or recent market prices for the exact parts. If you can show a cheaper legitimate source, the insurer may reduce the cost basis and authorize repair.

4. Provide business continuity rationale

   • Demonstrate lost income per day of downtime and how a short repair lead time solves that problem. For fleet operators this can tilt toward repair plus rental support.

5. Ask for independent appraisal or reinstatement option

   • Many policies include appraisal or arbitration. If the insurer totals and you disagree, trigger appraisal or request an independent technical inspection by an agreed expert.

6. Offer salvage buyback

   • If insurer totals, offer to buy the salvage at a stated price so you can attempt repair locally. This sometimes results in quicker resolution and may cost you less than lost business.

7. Get the broker involved as advocate

   • Good brokers escalate quickly and can push insurers to re-evaluate when provided with new evidence. Broker advocacy matters.

Common pitfalls that make repair harder or impossible

• Hidden structural damage discovered during teardown

• Control board or flight computer failure where diagnostic replacement is equivalent to replacement cost

• Corrosion or water intrusion where long-term reliability cannot be guaranteed after repair

• Proprietary components no longer produced or with long backorder timelines

• Policies with clear "total loss" clauses for certain types of damage

If any of these exist, accept the reality that total loss may be safer and faster.

Salvage options explained

1. Insurer retains salvage and pays you the net amount.

   • Typical when insurer wants to recoup value. They pay agreed or ACV minus salvage or simply pay and keep the wreck.

2. You buy back salvage from the insurer

   • You pay a salvage fee and take the wreck. Be realistic about hidden damage. If you plan a repair, get a teardown estimate first.

3. Insurer sells salvage at auction and offsets recovered proceeds

   • This is standard practice in many property claims.

Before you accept salvage buyback, estimate realistic repair costs and time. Hidden electronic failures often make buyback unrecoverable.

Examples that show how the math works

Example 1 - Cinema rig valued at agreed value $50,000

• Repair estimate parts and labor: $30,500

• Repair percentage = 30,500 / 50,000 = 61 percent

• If insurer threshold is 60 percent, an insurer might still total. If your repair evidence shows cheaper parts or expedited shipping adds cost but gives business continuity, argue repair with broker support.

Example 2 - Inspection drone ACV $8,000 after depreciation

• Repair estimate: $6,000

• Repair percentage = 6,000 / 8,000 = 75 percent

• Carrier threshold 70 percent means probable total. If you have a near-new invoice proving higher replacement cost or agreed-value endorsement, you can alter the basis and possibly push toward repair.

Work the numbers out explicitly when you discuss with adjuster. Show your math so nobody surprises you.

Sample email templates

Request for repair authorization

Subject: Request for Repair Authorization - Claim #[claim number]

Hi [Adjuster name],

Please find attached two detailed repair estimates for the damaged [make/model, serial]. Both estimates show line-item part and labor costs. I also attach the original purchase invoice, payload schedule with serials, and photos of the aircraft before and after the incident.

Repair estimate A (approved shop): $[X]

Repair estimate B (independent): $[Y]

Agreed value in policy: $[Z]

Please confirm whether you can authorize repair at [preferred approved shop] or advise the documentation required to approve repair. Quick turnaround is critical because we book [X] inspections per week and downtime causes material revenue loss.

Thanks,

[Name, contact]

Appeal after total loss declaration

Subject: Appeal of Total Loss Decision - Claim #[claim number]

To: [Claims Manager / Appeals]

We request reconsideration of the total loss declaration dated [date]. Enclosed are additional documents: second repair estimate showing alternative parts sourcing ($[amount]), vendor confirmation of part availability within [days], and a signed rental agreement showing daily revenue loss of $[amount].

We propose either:

1) Authorize repair at [shop] under the lower estimate, or

2) Allow salvage buyback at $[amount] and allow insured to attempt repair.

Please reopen the claim for review and advise next steps.

Regards,

[Name, contact]

Appeal, appraisal and litigation steps if you disagree

• Request claim file and denial justification in writing.

• Trigger appraisal or independent technical inspection if policy allows.

• Use small claims or mediation for smaller disputes. For large totals, counsel may be required.

• File a complaint with state insurance regulator if insurer acted in bad faith. Keep documentation tight and deadlines noted.

Practical checklist to use at the crash site and during claims

At the scene

• Photograph the rig extensively from multiple angles.

• Remove SD card, bag it, label it.

• Export telemetry and back it up.

• Record witness names and contacts.

• Note the job schedule and payload list.

During claims

• Obtain at least two itemized repair estimates.

• Provide original invoices and agreed-value documentation.

• Ask about salvage policy language and whether salvage value reduces payout.

• Keep a claim diary and escalate via broker if response is slow.

Final advice

Do not assume an insurer will repair because you want it repaired. The insurer decides by policy text and math. If you care about replacement cash or business continuity, buy agreed-value, schedule payloads, and keep invoices handy. 

After a crash, move fast: document, get estimates, and push your broker to advocate. If you show the math and provide reliable alternatives, you turn a total loss risk into a repair that keeps you flying.

Read: How Long Drone Insurance Claims Take (Realistic Timelines)

Author

Svetlana - I am a Drone Insurance Writer and Researcher. I write about drone risk management and insurance for US pilots. Not a licensed broker. For policy advices contact a licensed insurance professional.