What are the two ways an insurer can settle a total loss claim?

The correct response identifies that insurers typically have two primary methods for settling a total loss claim: a cash settlement or replacing the vehicle.

When a vehicle is deemed a total loss, it means that the cost to repair the vehicle exceeds its actual cash value (ACV). In a cash settlement, the insurer will provide the policyholder with a payment equivalent to the vehicle's ACV, allowing the insured to use those funds towards purchasing a new vehicle. This method gives the insured the flexibility to choose their next vehicle according to their needs and preferences.

On the other hand, replacing the vehicle involves the insurer providing a similar vehicle to the insured that matches the specifications of the lost vehicle. This option may be preferred in certain policies that include replacement cost coverage, allowing the policyholder to receive a vehicle that is newer or more valuable than the totaled vehicle.

The other options listed do not encapsulate the primary methods insurers use for settling total loss claims. For example, the mention of partial payments is unrelated to the total loss concept, as a total loss generally entails a full evaluation of the vehicle's value. Similarly, rental coverage and repair options apply in different contexts and are not relevant to how total loss claims are settled.