How is total loss determined in property insurance?

The determination of a total loss in property insurance primarily hinges on certain criteria regarding the extent of the damage to the insured property. The correct answer reflects the situation where a total loss occurs when the damage reaches a threshold in relation to the property's overall value.

In insurance terms, this means that if the damage incurred is extensive enough to exceed a predetermined percentage of the property's value—often set at 75% or more—then the property is typically considered a total loss. This threshold helps both insurers and policyholders understand when it is more economical to declare the property irreparable rather than to pursue costly repairs.

The other options involve considerations that do not directly define a total loss in the context of insurance. For example, determining the total loss based solely on whether the property is unrepairable is too subjective and can vary widely based on the interpretation of "repairable." The option regarding repair costs exceeding the insurance premiums paid is also not a standard for assessing total loss; insurance primarily focuses on the value and extent of damage rather than the cost-benefit analysis of premiums versus repairs. Lastly, the owner's decision to sell damaged property does not factor into the assessment of total loss, as it's based on the condition and value of the property itself rather than the