[Padgett]

The issue that is here is when the cost to repair exceeds the value of the item and the insurance company "totals" (exceeds the total amount of the insurance).

Now what happens here is that one of two things happen: either the insured accepts the maximum amount the insurance company offers and surrenders the title or agrees to accept a lesser amount and retains the item. Strictly speaking the second case is "agreed insured value" of the damage and your second case applies.

The problem occurs when an insurance company obtains the physical title and immediately submits it to the DMV to transfer ownership to them. The cheapest way to do this is to obtain a salvage title and once they do that you are done even though you never intended to transfer the property.

Personally I always get a paper (not electronic) title, keep in a safety box, and never surrender or even produce the title unless it is my intent to surrender the item.

As continually said each state is different and I have spent most of my life in Florida but my thought was if I intended to accept a lesser value and repair the item and the insurance company (or a bank) arbitrarily changed the title to "salvage" I would be consulting a lawyer about "theft of property".