Understanding the Total Loss Insurance Claim Process
Getting into an accident is no fun – especially when you hear the words “total loss”. It's something every car owner fears because it means your not getting you car back. On the flip side, this is also the time to start car shopping. Of course you’ll need to wait for your insurance settlement to know what kind of budget you're dealing with. The total loss process can be a difficult one which is why we have put together some information to help you better understand the process.
What Makes a Vehicle a Total Loss?
The decision to call a damaged vehicle a total loss is made based on a simple idea: does it make sense to repair the vehicle? That determination is based on the cost of repairs - if the cost of repairs exceeds a certain percentage of the value of the vehicle, then it is considered a total loss.
Most states set a guideline on what this total loss percentage is. For the sake of this article we will say that number is 80%. Though it can vary, that number is right around what most states use. So, if the cost of your repairs is 80% of the vehicle value, it is not repairable. Other factors that an insurance company will consider is if the vehicle was repaired - would it still be safe to drive?
Keep in mind, one stipulation of your insurance (which is a contract) is that you give your insurance company the full right to act as it sees fit. That means your cannot refuse to have your car be a total loss, and you cannot force your insurance company to make it a total loss. This is important because many people do not want their 'baby' fixed thinking that it will never be the same after repairs. You don't really have a choice: the insurance company is going to do what ever is most cost effective.
The Total Loss Process
To determine if your vehicle can be repaired, your insurance company will tow your vehicle to an inspection facility. There an adjuster will write an estimate of the damages to compare to the value of your vehicle. Your adjuster or claim handler will gather some basic details about your vehicle such as mileage, pre-existing damage, and ask if you have recently had any work done on the vehicle. You may have to provide receipts for any work. They will also ask for information like are you leasing or making payments, and do you have gap insurance. That will all help to determine your final settlement.
Determining the Value of Your Car
Many people mistakenly believe that car guides like Kelly Blue Book are the values they can expect to receive. This is false. KBB tends to represent what you would pay at a dealer, but not necessarily what your car is worth. A dealer may charge a premium because a car is popular and in high demand. We all know that the price at the dealer is negotiable, so it should be obvious that the asking price is probably not what the car is worth.
Once you vehicle is deemed a total loss, an adjuster will begin the process of determining the value of your vehicle. Car value is influenced by many factors including market: a 4x4 might sell for a higher price in an area that gets heavy snow, where as a Toyota Prius might have more value in a big city than a rural community. The overall price difference is small, but every dollar counts in your negotiation.
The adjuster will do a search of the local market to find vehicles that compare to your own. It's nearly impossible to find a perfect match so a sort of plus/minus system is used to determine your cars value. The point is to compare your vehicle to those nearby that are available for purchase, and determine how much more or less your car is worth in comparison. The comparable and your vehicle will be classified by condition to create a value range.
Value is determined by mileage, dents or damage that existed before the claim, and the care and condition of the vehicle. If your carpeting is heavily soiled, you have tears in the upholstery, or the tires are heavily worn - the value of your car will be less regardless of mileage, and your car will be labeled as in poor condition instead of average, good, or exceptional.
Any recent work you have completed on the vehicle is considered in the value of the car - but not like you would think. Tires and oil changes are considered to be normal maintenance required to keep a car in good condition, so if you just purchased a new set of $1000 tires don't expect to get that money back. It will help your case that the car was in good shape but you will not receive $1000 on top of the value of the car.
Dirty carpet, tears, scratches in the paint and other signs of neglect will warrant a value closer to the "poor" condition value. Spotless interiors and other signs of great care give the adjuster the power to label your vehicle as "good" or "exceptional" condition meaning your settlement can be higher.
Negotiating the Value of your Car
Once the adjuster makes the total loss settlement offer, it's time to consider if you think it is fair. In the vast majority of cases, the final offer is a fair one. But every now and then the adjuster might low ball an insured - this is where you need to do your homework and try to negotiate.
Think about your car and the shape that is in from an outside perspective. Most of us form an emotional attachment to our cars which makes us think it's in better condition that it really is. Think like a prospective buyer. Is there things you would notice if you were considering buying this car? Those are the types of things that an adjuster notices.
Take the time to search and see what your car is selling for, but compare apples to apples: if you see a Nissan Armada selling for $25k with 40k miles, is your 3 years older model with 80k miles worth close to that? No it's not. So it isn't fair to expect the newer, better condition price. On the flip side, if you really think your adjuster has low balled you, tell him so. It doesn't hurt to ask what comparables he found and talk about how he determined your value. Provide evidence that your car was in better shape than he determined, and negotiate for a number higher on the condition/value scale.
Also keep in mind that what you paid has no outcome on what your settlement is. If you overpaid on your car, don't expect the insurance company to make up for your poor negotiating skills. If you are upside down on a loan, that doesn't mean your insurance is going to take the monkey off your back either. That's why GAP insurance is a worthwhile purchase - if your car is worth less than you owe, GAP will cover the difference.
Have you ever had a Total Loss Insurance Claim? Was your Settlement fair? Comment Below