Recently, I helped a client of my settle the total loss to her car that was stolen. It occurred to me that this information might be useful for others. Before becoming an independent agent, I was a claims adjuster at a national insurance company. Working in that role taught me a lot. I discovered that most people with an automobile total loss case didn’t know the process and would settle blindly for any figure presented to them.
Insurance companies often use outside vendors to compile detailed reports listing comparable vehicles and their asking prices. These reports are usually accurate, but they can sometimes be inaccurate. You as an insurance customer must be educated when dealing with an insurance company to resolve your total loss. You will be much more prepared when the insurance company presents you with a settlement offer.
I’m often asked how insurance companies value a vehicle that has been declared total loss. Is it Edmund’s or Kelley Blue Book that they use to determine the vehicle’s value? No. California law forbids insurance companies to use such guides to determine the vehicle’s worth. These guides have a national scope and your vehicle’s actual value may differ from their estimates based on local market conditions. Insurance companies must determine the actual cash value and market value of your vehicle. This can be done by looking for similar vehicles in the local area. These ads can be printed in newspapers or online. To get an estimate for similar vehicles, the insurance adjuster might also speak to local dealers.
The insurance company will usually have 7-12 similar vehicles and will then list them all, average their prices and arrive at the estimated cash value of your vehicle. They will usually present the total loss settlement offer to you and ask you to sign the release. Here is where your research really comes in. You should begin your research as soon as you suspect your vehicle is a total loss. You should try to match your vehicle with as many people as possible (i.e. Similar year/make/model, same/similar options packages, mileage and condition You will want to search for the most comparable vehicles at the highest price. You should try to find five to ten comparable vehicles at the higher price range. To get an average, add all the prices together and divide it by the number of similar vehicles in your sample.
You will now be able to assess whether the settlement offer from your insurance company is fair or too low when they present it. It’s not about haggling like you would with a car salesman. Although the claims adjuster will want to settle your claim as quickly as possible so they can move onto the next file, they will need documentation to prove how they came to the final settlement amount. Let them know you did your research and that you feel their offer is too low. To see the research and report they used to arrive at their offer, ask for it. If you ask, they will oblige to give that information. Next, give them your research and ask them to add any comparable vehicles you have found to their list. Then average them all. This will increase the total figure.
Sometimes, such as when my wife’s total vehicle loss was covered by the insurance company, the offer can be very fair. After doing my research, I determined the actual cash worth of the vehicle. I was not surprised when the insurance company called to offer to pay more for the total loss than I had calculated.
Do your research and gather as much information as possible to help you determine whether the insurance company is offering a fair price. If they offer a low amount, you can use this information to strengthen your position and maximize the settlement.