I am commonly asked by clients “How do I avoid being ripped off when my car is totaled?” Everyone seems to be afraid that they're getting low balled by their adjuster. In most cases, we find this is not what is happening. While adjusters aren't perfect they're generally good people and they're trying the best they can to offer fair claim settlement. A little extra knowledge and research on your part can help to put you at ease.
How do Insurance companies determine if my vehicle is totaled?
Generally speaking, a damaged vehicle is considered totaled when the cost to repair exceeds or nearly exceeds the market value of the vehicle. Thresholds vary from state to state and even company to company. A general rule of thumb is that if the cost of repairs is 75% or more of the market value the vehicle it may be totaled. In Virginia, this threshold is set and monitored by the bureau of insurance.
How do adjusters arrive at a value for a total vehicle?
Insurance company adjusters have access to software packages that they use in determining the market value of a damaged vehicle. However, the first step in the process is to assess the condition and mileage of the damaged vehicle. It stands to reason that an older vehicle with high mileage and existing damage would not be as valuable as a newer vehicle with low mileage and no damage.
Once the damaged vehicle has been assessed, the adjusters use a third-party software to do market research to determine what the value of the actual damaged vehicle is. The system will search databases of actual car sales and listings to see if there are similar vehicles to the totaled vehicle listed for sale in the area. These list prices are used as a basis for determining the value of the totaled vehicle.
If you want to avoid being ripped off when your car is totaled, do your own research. To do so, you will need to gather information from multiple sources. I generally go to KBB.com first to get an idea of value from there. There are other resources as well such as NADA.com and Edmunds.com, but I am just more familiar with KBB. No matter what initial sources you choose, just know that you cannot stop there. You need to look for actual listings of similar vehicles for sale in your area. Be honest with yourself. If your car had some scratches, dings, high mileage, and the interior was starting to wear out, don't expect to get the highest value shown from a dealer or KBB.
Another thing to consider is add on equipment. Say you put new wheels or a new motor in your vehicle. If those upgrades cost $5000, for example, that does not mean that you have improved the market value of your vehicle by $5000. Therefore, you should not expect that an adjuster is going to give you $5000 above standard market value. After all, standard market value assumes that your vehicle has at least a standard motor and wheels. As a matter of fact, in the case of new wheels, often times the factory wheels cost more than custom ones. You may have actually lowered the market value of your vehicle by adding them.
How should I go about negotiating with my adjuster?
Claims adjusters have a very tough job. I have found the vast majority to be good, hard-working people who truly want to do right by claimants. They tend to do the best job that they can researching every claim before making an offer and when they do make an offer of settlement they're doing so because they think it is fair, not because they're trying to low ball someone. With that said, sometimes it is possible for claimants and adjusters to have an honest difference of opinion about values.
When negotiating with an adjuster, keep your cool. Blowing up will only make the situation worse. I have found that if you treat them with respect they will generally return the favor.
Do your own research and be ready to back it up. I have outlined a few steps above to take on your own to determine market value of your vehicle. Be sure to find multiple sources of valuation. Then, take the average of those that are most similar to your vehicle. That should get you close to a reasonable value. If you still can't come to a reasonable value, contact your independent insurance agent or just call us. Be sure to have supporting documentation to present to the adjuster as justification for your value.
If you still can't agree, you may want to hire an independent appraiser. I would imagine that this option would very rarely be necessary, but it is an option. Just know that if you do choose to hire an independent appraiser it will likely be at your own expense. Their opinion would not be the only determining factor, however. It would just be more support in negotiating a final settlement.
How long should my rental coverage pay?
Let's assume that you and the adjuster have worked out a fair value that you're both happy with. The insurance company is going to keep the car. So, now you need to buy new one. Let’s also assume that you were wise enough to purchase rental coverage. How much time will they continue to pay for your rental car so that you can shop for a new car? It is reasonable to expect 3 to 5 days of rental coverage after the settlement check has been issued. Note that I said after it has been issued not received. This means you need to be shopping right away. Having extra time will allow you to do a broader search for a new vehicle and to have more freedom in negotiations with car dealers. If you wish to keep the rental car longer, that is okay. Just know that you will have to pick up the tab for the additional days.
Can I buy my totaled vehicle back?
You can usually buy your totaled vehicle back from the insurance company. You will have to pay whatever the salvage value is for your particular vehicle. This can vary greatly depending on the type of vehicle that you own. However, I am told that that the industry standard for salvage value is as much as 20% of the market value of the vehicle. Your claims adjuster should be able to give you an accurate salvage value, though. Also know that you will likely have to retitle the vehicle with DMV to a salvage title. Having a salvage title will likely affect the vehicles future resale value since it has been damaged.
What is the process if I have a loan on my vehicle?
The insurance company has a duty to protect the interest of the bank that made the loan on your vehicle. This means that before any settlement is made the adjuster will likely contact the bank to find out what the payoff amount of the loan is. If you are upside down on your vehicle loan, meaning you owe more than the vehicle is worth, the adjuster and the bank will likely negotiate a settlement between the two parties and all payment from the insurance company will be made to the lien holder. In this case, you will not receive a check. As a matter of fact, the bank may try to collect the difference between the settlement amount and the loan amount from you.
If you have a loan and the settlement amount is higher than the payoff of the loan amount, the process is much simpler. The insurance company will simply send a check to the lien holder in the amount of the payoff of the loan and any additional money above that will be sent to you. In either case, the vehicle would remain with the company (unless you buy for salvage cost) and the title would need to transfer to the insurance company.
The bottom line is that most adjusters are trying to do a good job for you. If you go in understanding that you'll most likely have a better experience. Disagreements may arise, but they can generally be handled if all parties remain calm and deal with each other openly and honestly. This is also a good time to get your independent insurance agent involved. We deal with a lot of insurance companies and we understand the process. This is one of the biggest advantages to having an independent agent rather than buying through a 1-800 number or a website. A knowledgeable Insurance agent can be a huge asset to you in these types of claims.