Auto Insurance Total Loss: What Does It Cover?

If your car is involved in an accident and the cost of repairing it is more than its actual cash value (ACV), your car insurance company will consider it a total loss. A total loss can also be declared if the car cannot be repaired at all. In this case, your insurance company will offer you a settlement, which may involve taking possession of the car and selling it to a shop to be repaired or rebuilt.

The process of negotiating a total loss settlement with your insurance company can be challenging, but it is possible to engage in negotiations to ensure you receive a fair payout. This may involve determining the vehicle's worth, gathering relevant documents, and preparing a counteroffer.

The insurance company's offer

When a car is involved in an accident and is deemed a total loss, the insurance company will offer a settlement to the policyholder. This settlement amount is calculated based on the vehicle's actual cash value (ACV) at the time of the accident. The ACV is determined by factors such as the vehicle's make, model, mileage, and any damage prior to the incident.

It is important to note that the insurance company's initial offer may not always reflect the true value of the vehicle. Policyholders have the right to negotiate and ask for a higher settlement amount if they believe their vehicle is worth more. Here are some steps to follow when dealing with the insurance company's offer:

• Determine the vehicle's worth: Before negotiating, it is crucial to independently assess the value of your vehicle. This can be done by considering factors such as the year of manufacturing, mileage, and any aftermarket upgrades. Online tools, such as the National Automobile Dealers Association's (NADA) website, can provide a ballpark figure for the vehicle's ACV.
• Get an estimate: Obtain a written estimate from a trusted mechanic or expert witness, detailing all necessary repairs. This can be used as evidence during the negotiation process.
• Review the adjuster's offer: Carefully review the insurance adjuster's offer and compare it to your research on the vehicle's value. If you feel the offer is too low, be prepared to negotiate and provide supporting documentation.
• Negotiate the settlement: If you disagree with the adjuster's offer, you have the right to negotiate a higher settlement. Present your counteroffer, along with any receipts, estimates, or evidence of your vehicle's worth. Remember that insurance companies expect some level of negotiation, so don't be afraid to advocate for a fair value.
• Consider hiring a professional: If negotiations are not progressing, you may want to consult an attorney or a public adjuster. They can provide expertise and guide you through the process of dealing with insurance settlements.
• Get everything in writing: Once you and the insurance company reach an agreement on the settlement amount, make sure to get it in writing. This ensures that both parties understand their financial obligations and expectations.

Remember, you are not obligated to accept the insurance company's first offer. Conducting thorough research and gathering supporting documentation will strengthen your case when negotiating a higher settlement amount for your total loss vehicle.

Negotiating a higher settlement

Know Your Rights and Prepare Well:

Before entering into negotiations, it is crucial to understand your rights and the terms of your insurance policy. Familiarize yourself with any specific clauses related to total loss settlements and the process for disputing or appealing a settlement offer. Take time to review your policy's coverage limits, the method used to determine the vehicle's actual cash value (ACV), and any relevant state regulations or policy terms regarding total loss declarations. Additionally, give yourself time to process the settlement offer. You are not required to accept or respond to the offer immediately. This time buffer will allow you to gather your thoughts, seek legal advice if needed, and make an informed decision.

Gather Evidence and Determine Vehicle Value:

To negotiate effectively, you need to independently determine the value of your vehicle. This involves considering factors such as the year of manufacturing, mileage, and any aftermarket upgrades. Utilize online tools, such as the National Automobile Dealers Association's (NADA) website, to obtain a ballpark figure for your vehicle's ACV. Remember, the ACV is based on the replacement cost minus depreciation and may differ from the fair market value or the cost of replacing the vehicle. Additionally, obtain a written estimate from a trusted professional body shop, as this will be valuable during negotiations.

Review the Adjuster's Offer and Identify Discrepancies:

Carefully review the settlement offer provided by the insurance adjuster and identify any discrepancies or undervalued aspects. Request a copy of the Certified Collateral Corporation (CCC) report used by the adjuster to estimate your vehicle's value. Ensure that all relevant factors, such as your car's trim level and mileage, are accurately reflected in the report. Compare the adjuster's offer with your own research on comparable vehicles (comps) in your area. Look for similar vehicles in terms of make, model, year, mileage, and condition that are currently for sale or have been recently sold. This will help you determine if the adjuster's offer is in line with local market values.

Prepare and Present Your Counteroffer:

Based on your research and evidence, prepare a well-supported counteroffer. Utilize tools like NADA or Kelley Blue Book to determine the retail value of your vehicle accurately. Remember to focus on the retail value, not the trade-in value, as you are selling your car to the insurance company. If you have made any aftermarket upgrades or recent repairs, gather receipts to support your claim. Present your counteroffer in writing, attaching all relevant documentation, including the NADA value, used car reports, and repair costs. This demonstrates your credibility and strengthens your position during negotiations.

Consider Seeking Legal Advice or Mediation:

If negotiations with the insurance adjuster prove challenging or unsuccessful, consider seeking legal advice or mediation. Consult with an attorney or a public adjuster who has expertise in dealing with insurance settlements. They can guide you through the process, provide valuable insights, and help you navigate your options. Remember that hiring an attorney or a public adjuster may incur additional costs, so ensure that the potential increase in your settlement justifies these expenses.

Maintain Effective Communication and Documentation:

Throughout the negotiation process, maintain clear and effective communication with the insurance adjuster. Listen to their responses and be open to compromise, but also advocate for your interests. Ask questions to understand their priorities and motivations. Additionally, ensure that all agreements and offers are documented in writing. This provides a record of the negotiation process and helps protect your interests by setting clear expectations for both parties.

Independent appraisal

When a car is declared a total loss, it means that the cost of repairing the vehicle is higher than the car's value. In this case, the insurance company will calculate a total loss settlement amount. However, it is not uncommon for there to be a discrepancy between the insurance company's settlement offer and the car owner's perception of their vehicle's worth. This is where an independent appraisal can be useful.

An independent appraisal is when a licensed appraiser, who is not affiliated with either party, assesses the value of the vehicle. This can be done by considering the vehicle's unique characteristics, such as its make, model, body style, mileage, and any upgrades or repairs. The appraiser may also use current market comparables to determine the value of similar vehicles in the area. This information can then be used to negotiate a higher settlement amount with the insurance company.

There are several companies that offer independent appraisal services for total loss claims, such as Auto Appraisal Group, Inc. (AAG), Appraisal Engine Inc., and Autoloss. These companies typically provide a certified appraisal report that can be used as evidence during negotiations. In some cases, these companies may also assist in mediating the claim or arbitrating with the insurance company's appraiser to reach an agreed-upon value.

It is important to note that there is typically a cost associated with hiring an independent appraiser, and this cost is usually borne by the car owner. However, by obtaining an independent appraisal, car owners can ensure that they receive a fair settlement that reflects the true value of their vehicle.

Overall, an independent appraisal can be a valuable tool for car owners who feel that their insurance company's settlement offer for a total loss claim is too low. By providing an unbiased assessment of the vehicle's value, an independent appraiser can help car owners negotiate a higher settlement and ensure they receive the compensation they deserve.

Mediation

If you disagree with an insurer's valuation of your car or repair estimate, you can opt for mediation. Some insurance policies allow for mediation, where a neutral third party helps you and the insurer reach an agreement.

Review your insurance policy:

Read through your insurance policy carefully to understand the terms and conditions, including any mediation clause or process outlined in the policy. Some policies may specify that mediation is an option, while others may not mention it. If mediation is not mentioned, you can still inquire with your insurance company about the possibility.

Initiate the mediation process:

If mediation is an option, contact your insurance company to express your interest in pursuing mediation to resolve the dispute. They will likely have a process in place for requesting mediation, which may involve submitting a formal request or filling out specific forms.

Select a mediator:

The mediator should be an impartial third party with no connection to either you or the insurance company. They should have experience in mediation and, ideally, expertise in insurance or automotive disputes. You and the insurance company may need to agree on the selection of the mediator together.

Prepare your case:

Before the mediation session, gather all relevant documentation, including evidence of your car's value, repair estimates, and any other information that supports your position. Organise your arguments and be prepared to present your case clearly and concisely to the mediator and the insurance company representative.

Participate in the mediation session:

During the mediation session, the mediator will guide the discussion and help both parties explore options for resolving the dispute. Be open to negotiation and compromise, as mediation is a collaborative process aimed at finding a solution that satisfies both parties.

Finalise the agreement:

If a mutually agreeable resolution is reached during mediation, it should be documented in writing and signed by both parties. This agreement is then typically binding, and both you and the insurance company are expected to uphold its terms.

It is important to note that mediation is a voluntary process, and both parties must agree to participate. If the insurance company is unwilling to engage in mediation, or if mediation is unsuccessful, you may need to pursue other options, such as arbitration or legal action, to resolve the dispute.

Hiring an attorney

When your car is completely totalled, your insurance adjuster will determine the amount of the settlement. Sometimes, insurance adjusters and policyholders disagree on the car's value. In such cases, you can negotiate with your adjuster to get a better insurance payout. If you are unsatisfied with the negotiation efforts, you can hire an attorney as a last resort.

An attorney will be more familiar with the process and can help relieve some of the stress surrounding total loss negotiations. They are armed with experience and skill, and can help you fight for the settlement amount you think you should have. However, there will typically be a cost associated with hiring an attorney, and there is no guarantee that you will win a new settlement even if you hire one. As such, it may be a good idea to ensure that the attorney’s fees won’t outweigh the potential increase in your settlement amount if your insurance company agrees to a higher payout.

If you need help finding an attorney, you can visit an attorney directory or contact a qualified personal injury attorney.

Frequently asked questions