Whether you are dealing with USAA, Farmers, State Farm, Nation Wide or one of the many other auto insurance companies, they are have the same objective... to reduce auto claim costs as much as possible.
Auto insurance adjusters that work for these companies are highly trained negotiators.
Their primary job is to:
Establish rapport and build relationship with you
Gain your cooperation
Get your agreement to the facts
Lead you (unknowingly) step by step through their "claim settlement process"
Insurance adjusters use this negotiating process to lead you away from your emotional arguments and opinions (like the value of your car) and towards the "facts of of your car accident claim". The facts as they relate to your total loss car claim is the insurance company's actual cash value appraisal.
The entire process is methodical and structured to get your agreement for the purpose of settling your claim quickly and for the lowest cost to the insurance company.
The truth is, their "settlement process" works and the result is the insurance company saves money... money they don't have to pay you. Watch this video to get a better understanding of how insurance adjusters are trained to get you to settle your claim.
While I understand the insurance companies business case for needing a "settlement process", most people do not have the same level of experience or the tools (your own actual cash value appraisal) to effectively counter the insurance company's low value settlement offer.
The fact is, the insurance companies settlement process is so effective most people I have spoken to actually believe they got a fair car accident claim settlement. These were people who settled their total loss car claim using arguments, classified ads or the blue book.
It is actually very easy to get the insurance company to increase their cash offer by using these methods. Truth is, insurance adjusters expect you to complain, quote the blue book value or some car ads. This is why their initial offer is so low; so they can increase it a bit so you feel like you "won".
In reality they are happy, ready and eager to pay you just a bit more if it means settling the case and saving money paying your claim.
This may be hard to believe or you may think this won't happen in your case, but from my experience, people who did not negotiate their car accident insurance settlement with an actual cash value appraisal... almost everyone of them lost at least $2,000 to more than $7,000 on their insurance claim payout.
Remember, insurance adjusters are trained pros at making your believe you go a fair deal.
The most common response I see quoted online for the question, "what makes a car totaled" is when the cost to repair the damage equals 75% or more of the actual cash value of the car.
This is very misleading because this percentage is different in some states. While some insurance companies do use the 75% rule not all of them do. Some will use a higher percentage and others a lower percentage. In addition, some states the percentage used to determine if a car is totaled is controlled by state regulation.
To further complicate the question, some auto insurance companies rely on the Total Loss Formula which is an Actual Cash Value appraisal completed by an auto appraiser.
Here is a list of the states and their corresponding Total Loss Threshold
Rules can change, so do not rely on the above information and call your insurance provider to confirm what they consider a total loss and how it is calculated.
The more you know about what makes a car totaled the better prepared you will be to handle and negotiate your auto insurance claim.
This video gives a couple good tips with the exception of KBB which is great for finding out the general vehicle value. In my opinion, it is not the best source to determine the actual cash value for total loss vehicles. I find it typically reports below retail or replacement value of most vehicles.
Your car is a total loss and you feel strongly the insurance adjuster is offering you a low-ball payout on your car. Your first step is do not accept the insurance company's first offer. Your next step is to research the value of your totaled car before the accident and before you agree to any cash settlement with the insurance adjuster.
I realize everyone just wants to get the whole ordeal over with as soon as possible but making a hasty decision at this juncture will most likely cost you hundreds if not thousands in cash on your claim payout. This is what can happen when you try to take a short-cut by using an online car value calculator to determine the market value for your car before it was a total loss. By doing this, you could possibly be risking losing serious cash on your vehicle. More on this in a moment.
Actual Cash Value Calculator
An actual cash value calculator is an internal computer program used by some insurance companies to determine the actual cash value of vehicles that have been damaged in an accident. This cash value calculator is not for the public and is only accessible to employees of the insurance company. While some insurance adjusters may rely on these calculators to ascertain a cash payout value for a total loss vehicle, not all insurance companies do. Others, contract the services of independent private companies to determine the actual cash value by doing a car appraisal.
Book Value Calculator
You can find car value calculators on websites like canadianblackbook.com (in Canada), edmunds.com and Kelley Blue Book (kbb.com). However these calculators are best used to get a general idea for trade in value or for a listing value when selling your car. Do not use these services to prove the actual cash value for a totaled car.
If you choose to rely on the indicated book value from an online car value calculator, the chances of your insurance adjuster accepting this value and paying it is extremely remote.
The reason is, the value created be the online value calculators is not the actual cash value. They are to get an idea of a trade-in value or an asking price for a private vehicle listing.
Even if the insurance companies did accept these online book value calculators, it would be in your best interest not to use one. While these calculators do provide an indication of value they can not replace human judgement and rationale when making comparisons between the total loss car and the market value of current comparable vehicles.
For example, online book value car calculators:
Do not account for after-market items that may increase your cars value
Do not account for customizations that may increase your cars value
Do not account for specific differences in wear, tear and damage or lack thereof
May not account for all vehicle options that may add value
Use a large sample of vehicles to produce an average estimate of value.
And most importantly it is not a detailed actual cash value estimate
Unfortunately, there is no short-cut to determining the real actual cash value of a totaled vehicle. That is why the insurance company has professionals working for them to write car appraisals. You also have the option to hire a professional public adjuster to determine the value of a totaled vehicle for you.
If you choose to hire a public adjuster, it could cost you as much as $300 on average to get a actual cash value appraisal for your insurance claim.
However, there is an alternative that is way cheaper compared to the cost of hiring a public adjuster and can produce an actual cash value appraisal your insurance adjuster will accept as an opinion of value.
One question many car owners have when in a collision is what makes a car totaled, or what is commonly known as a “total loss”.
This question can confuse many people especially if they have been in a car accident and their vehicle appears to have sustained minimal damage.
There are many factors that need to be considered before an insurance adjuster will deem a vehicle a total loss. For instance, while the car may have what appears to be minimal visual damage, there can be severe damage to the vehicles frame and structural integrity. There may also be heavy damage to the engine and transmission. It is these unseen damaged components that can determine the vehicle is a total loss.
There is also the age of the vehicle. An older car worth $6,000 that has damage estimated at $5,000 would typically be considered a total loss. Compare this to a newer vehicle worth $25,000 and the same $5,000 damage which would be repaired.
Sometimes the answer to whether a car is deemed totaled can even be misjudged by the insurance adjuster. I personally have seen a situation where a vehicle worth $1,500 sustained damage to the rear quarter panel at an estimated cost to repair of $2,400. While most would agree the vehicle should have been ruled a total loss, this particular vehicle was repaired.
Car insurance payout mistakes
The former example resulted from an error in estimating the car value and by the time the error was realized by the insurance company the repair had been completed. Which worked out well for the car owner as they loved their car and did not want the car deemed a total loss.
So it pays to check out any offer the insurance adjuster offers because they are only human and could have made a mistake.
How does car insurance determine value
In general, a vehicle is considered totaled and a complete loss when the cost to repair the damage to the vehicle exceeds the total or a predetermined percentage of the market value of the vehicle. The market value is referred to as the actual cash value (ACV) of the vehicle.
While the percentage of ACV varies between state, province and insurance companies a common ratio is 75% to 80% of ACV. In other words, a vehicle may be considered a total loss by one company or state and may be repaired in another.
Another common method some insurance companies use is the "Total Loss Formula". This formula is determined by taking the cost to repair the vehicle and it to the salvage value of the vehicle (the value of the vehicle when sold salvage). If this combined number is greater than the ACV the vehicle is typically considered a total loss.
How to determine total loss value
It is best to determine how a vehicle is considered a total loss in your area by calling the insurance company claims adjuster to get an exact explanation on how they determine when a car is totaled.
When a vehicle is on the cusp of being ruled a total loss or not, the most common factor that may swing the decision is the ACV of the vehicle. The problem with the ACV is its subjective nature being that it is an opinion of value based on market evidence.
As an example, let’s say there are two companies contracted to do an ACV appraisal on a totaled car. While the value conclusion produced by each company may be close, it is very unlikely their opinions of value will be exactly the same. The difference in opinion at times can vary several hundred or even several thousand depending on how much time, effort and detail went into creating the ACV report.
Since the ACV is a critical piece of the equation when determining a total loss, it is important for those dealing with a total loss situation to become educated on how to gauge the actual cash value of their vehicle. Not doing so could mean losing the car you love because it was valued to low in relation to the estimated repairs or worse, being underpaid (below ACV) on your total loss claim.
When it comes to getting an accurate picture of what your car is worth, the most common issue that has to be addressed is the actual value of the vehicle.
In the auto industry, many turn to a few online tools like the Kelley Blue Book (kbb.com) and the Canadian Black Book (canadianblackbook.com) as guides only. This is especially true when the car has been in an accident and considered to be a total loss and you need a more precise method of determining the actual value. More on this later.
Many of those engaged in the automotive business like car dealers often refer to the Kelley Blue Book when they need pricing information on a given car model. However, car dealers are not the only ones benefiting from the use of the book. Lending institutions also find the values assigned by the Blue Book and Black Book on various vehicles quite useful especially when considering the market value of a car submitted as collateral by a loan applicant.
New and Used Car Book Value
The so-called Book values are an extensive price listing of practically every existing car and vehicle models. These include both brand-new and used vehicle varieties, with the information initially available only in selected trade publications prior to becoming publicly accessible.
Since these values are known to be updated regularly, they have eventually become highly-reliable as a guide on car price data. This has been made possible through the regular compilation of car price information as obtained from different sources that include car rental companies, authorized car dealers, lending institutions, and even individual consumer car sales transactions.
Given this rather vast information sources, it is no wonder why the values contained in the Kelley Blue Book and Canadian Black Book are highly sought.
In particular, these values will be referred to by auto insurance agents only as a check on value when completing an Actual Cash Value (ACV) estimate or car appraisal on a given car that has been totaled.
The two terms are useful for car owners who may have unfortunately met a vehicular accident and are seeking insurance compensation. There is often a need to differentiate the ACV and the Replacement Cost Value (RCV) in order to better understand how car insurance coverage actually works.
Essentially, when any vehicle gets insured, an auto insurance company will usually provide its ACV which is the actual price of the vehicle computed after the depreciation cost has been subtracted. This can be a bit confusing at times especially when brand-new cars are involved.
In this case, many car owners are of the belief that their cars have a high market price simply because they are new. This is often where the problem begins as the depreciation aspect is disregarded which will be significant if and when a road mishap is encountered.
Simply put, all car types suffer from depreciation the moment they are purchased. The value is often not specific as this will depend partly on the model of the car but it does exist. As such, when a given vehicle suffers damages as a result of an accident, the ACV will most likely be lower than originally expected.
On the other hand, the RCV is a little easier to understand. As its meaning implies, the RCV refers to the amount of costs needed in order to replace or repair a car after getting damaged. Normally, the RCV is an amount set by auto insurance companies in consultation with the car owner. This should be adequately reflected in the corresponding insurance policy. This is how the insurance company determines what your car is worth.
Either way, the Kelley Blue Book and Canadian Black Book will often come into play as a check on value whenever auto insurers try to determine the ACV as well as the RCV of a given vehicle. Interestingly, the information contained in the books is already available in the internet. This should prove to be helpful to the typical motorist as he no longer needs to rely on his insurer when they need to find out a general idea of how much their car is worth for a trade in or for sale pricing details for his/her car.
Actual Cash Value Calculator
Another common tool that auto insurance agents usually use in computing the ACV is the so-called Actual Cash Value Calculator. This often works as a type of computer program where pertinent vehicle details are required before the car value can be calculated. This is an internal software and the general public does not have access to this computer program.
With all these online car value tools, not one can replace the analysis and detail of an actual cash value appraisal performed by a qualified professional vehicle appraiser. While sites like kbb.com and canadianblackbook.com can provide an indication of value, they are computer generated averages and cannot know the exact details of a specific car, the market conditions in which the car is trading or select the absolute best comparable vehicles for the highest cash value on a specific date.
If your car has been in an accident and the insurance company says it is a total loss, to find out what your car is really worth you would be wise to obtain an ACV appraisal. Hiring an appraiser can run between $150 for a desk appraisal to as much as $300 for a detailed vehicle appraisal where the comparable sale vehicles are inspected for their similarities and differences compared to the car being appraised.
As an alternative, doing your own ACV appraisal is an easy process when you know what steps to take. If you want to get the highest payout for your totaled car, we can help you do that.
As the video below explains, online book value calculators only give you a general idea of your car value. This is why a proper actual cash value appraisal is essential to determine what your car is worth.
Insurance adjusters work hard to lower claim costs... but you don't have to worry about this when you know what to expect and how to present your case for a higher payout.
In order to increase your payout you will need to do some negotiating with the insurance adjuster. This may seem kind of scary for some but if you have the right tools in hand you can negotiate with confidence.
No matter who is at fault for the accident that wrecked your vehicle, you will have to deal with an insurance adjuster. The insurance adjuster is employed by the insurer to settle accident claims quickly at the lowest cost.
After the auto insurance adjuster presents you an offer to settle your claim, you don’t have to accept it – and you shouldn't because unless the insurance adjuster makes a mistake and gives you an above market offer the offer will be low.
Why car insurance companies payout is too low
There are over 6.4 million car accidents each year in the USA costing insurance companies more than $230 billion dollars in claim costs. With these kind of claim costs it’s not a surprise the insurance companies will do what they can to lower their claim costs.
Insurance companies work hard to settle their claims by trying to get you to agree to a settlement. This is because the first settlement offer is the lowest and if they can get you to agree they save money.
Even if you are in a pinch and need the cash, resist the temptation to get cash in your hand as this could mean losing out on potentially a few thousand dollars.
When you turn down their first offer there is a good chance the insurance adjuster will come back a few days later and offer you more cash. You could refuse this offer too but the problem you are going to run into is the “final offer” statement from the insurance adjuster.
Auto insurance payout on totaled car example
Let's say, the insurance adjuster offers you $10,000 to settle your total loss auto insurance claim.
You request a copy of the insurance adjusters cash value report and review it.
You refuse the offer by saying it is too low and you feel your vehicle is worth $15,000 before the accident. You give them some examples as to why like low mileage, exceptional condition, etc.
The insurance adjuster says she/he will look at it again and call you back in a couple days. They do call back and offer to pay $12,000 without prejudice if you accept the offer. The offer is their last and final offer.
You know the revised settlement offer is still low but the insurance adjuster has a cash value appraisal that supports a value of $10,000 – Do you take the $12,000 because you feel there is nothing you can do?
The best way to handle this all too common situation is to have your own evidence supporting your vehicles market value (cash value). When you have your own evidence you are in a much better position to have the insurance adjuster increase their settlement offer to a value much closer to the actual cash value of your wrecked vehicle.
Continuing with the total loss example above
Let's say, after the initial settlement offer from the insurance adjuster, you reject their offer and you present her/him with your actual cash value evidence of similar vehicles.
Seeing your evidence, insurance adjuster comes back to you with an offer to settle the claim at $14,000.
Rejecting the second offer will likely result in having to go to some sort of arbitration or appeal process the insurance company uses. Whatever the appeal or arbitration process it is designed to give you a fair and impartial hearing to present your case and prove your vehicle is worth more than the insurance adjuster is offering to settle the claim.
However, the insurance adjuster is banking you will not want to go through the process for an extra $1,000 and settle at $14,000.
How to dispute a car insurance total loss valuation
You could settle and take the $14,000.
By offering a settlement of $14,000, the insurance adjuster has basically rejected your proposed value of $15,000. You could submit a counter offer at some number higher than $14,000 and less than $15,000.
Reject the $14,000 settlement offer, take the next step and elevate your claim as an appeal or to arbitration.
When you know the right steps to get the full cash value of your vehicle, dealing with an insurance adjuster becomes easy.
Would you like to be armed with your own professional actual cash value appraisal that will give you the confidence and leverage you need when disputing your claim settlement?
You can hire someone to do a cash value appraisal on your wrecked vehicle. These business will cost you between $175 for a desk appraisal (short form) to as much as $300 for a detailed cash value appraisal which is what you want.
I am here to tell you do not need to spend hundreds of dollars to get a professional cash value appraisal... not even close. And I am also going to tell you, if other people just like you can dispute the insurance adjuster's total loss valuation and negotiate a successful outcome with our system... so can you.
Learn more on how you can create your own professional
If you rely just on the asking price or sale price of a couple vehicle listings you printed off the Internet, you could be making a big mistake and miss out on several thousand dollars of extra cash for your total loss vehicle.
Remember the auto insurance company has a full appraisal report backing their cash offer. How convincing will a couple Craigslist ads be by comparison? For this reason having your own vehicle appraisal supporting a higher payout is critical.
Selecting Comparison Vehicles
The easiest place to find and select comparable vehicles to appraise your car is from online sites such as Autotrader, Craigslist and other sites that list ads for vehicles. You are looking for vehicles that would be considered "replacement" vehicles. Now this does not mean they are identical vehicles, they are vehicles that are similar in age, make and model. If you are finding it a challenge to find similar vehicles online, don't forget to check the classified section on local papers. Once you have at least three similar vehicles, you will have to make price adjustments to each comparable to account for differences between the comparable vehicle and subject vehicle.
The asking price or sale price of a comparable vehicle is not the "adjusted price" used in comparison and selecting a final value for the subject vehicle.
There are many items that require the original asking price or sale price of the comparable vehicle to be adjusted either upward or downward. (You never make adjustments to the subject vehicle being appraised)
For example the most common items on a comparable vehicle that require an adjustment to the original price are:
The OBO (or best offer) if you are using an asking price as your starting point
Options such as power windows, air conditioning, etc.
The condition of the exterior and interior
Differences in the odometer reading
Differences in year built (at times you will only find vehicles that are a year or two older/newer)
Of course the number of items that require adjustment are more than listed above. If you are interested to learn more, go check out the Total Loss Cash Recovery system.
Warning: If you adjust your comparable vehicles with "inflated" adjustments to get a higher final value your opinion of value will be disregarded. You are dealing with professionals here and they will spot these type of shenanigans immediately. So it is critical you apply reasonableness when making adjustments and don't pad the adjustments to get a "higher" than market value outcome.
Vehicle value comparison conclusion
Once you have three comparable vehicles and adjusted their asking price or sale price, you will have a range of adjusted prices from the lowest to the highest. Your next task is to determine where the value of the subject vehicle falls within this adjusted price range. You should pick the best comparable of the three and use this as your guide to determining a final value for the subject vehicle.
The next step is to write a justification on your final opinion of value based on the adjusted price evidence you provided (comparable vehicles). The goal with this part is to lead the reader (insurance adjuster or arbitrator) through your thought process in how you determined the final actual cash value based on your analysis of the three comparable vehicles. Finally, state your conclusion for the subject vehicle.
If this is your first (or not) total loss vehicle claim, this article is for you.
Here's the thing... The auto insurance companies don't want to pay your claim! There,I said it.
That is why they do their investigative homework and fine-tooth comb every detail and fact looking for a way to get out of paying the claim on your totaled car or at least reducing the dollar amount payable.
Don't take my word for it just look at these excerpts from Yahoo Answers.
What value does Geico go by to determine reimbursement for a total loss?
I Have a 1999 SVT Ford Mustang Cobra with 116,000 miles on it, that was in excellent condition that i have recently totaled and Geico is only offering me 7600 but NADA is 9200 and KBB is 9600. How can i fight this? they say there not going to change it. See original post
Can you refuse an insurance offer for reimbursement of a total loss?
The party at fault's insurance will pay total loss for my 99 corolla and is now examining the case, I know they'll try to lowball me and deduct the so-called salvage value. See original post
Why can't insurance companies offer you Retail Value on a total loss car?
I was involved in a car accident and it’s determined that it’s 100% the other party’s fault. My car is a total. My insurance did my car valuation since my insurance covers two way.ok.. I now understand the value my insurance co can offer to my total loss car is at the actual cash value. BUT, when I go to the dealer and buy a same car as the one I lost, I'm paying them the RETAIL VALUE. and actual cash value is always less than retail value. So who is paying for the difference??? See the original post
Unfortunately, these are just a few of the 100's of thousands of people in North America who have a very similar story.
I have been through multiple vehicle claims personally over the years and helped out many more people with their vehicle claim. It never fails that the insurance company always offers their cash payout on the low end of fair market value.
Is a car insurance payout market value?
The reason becomes clear when you consider they make their money by collecting your premiums - not paying your claim. So every dollar they save on your claim is an extra dollar of your's they keep in their pocket.
Another reason the insurance company offers a low value to start is because they have an actual cash value appraisal in hand that tells them how much your car is worth... and you don't.
So the typical deal from my experience goes like this: the insurance company picks the lowest possible cash offer they believe you may accept. If you do the deal is done and they cut you a check.
If you refuse their first offer, they will most likely sweeten the pot by bumping the offer hoping you will view them as being generous and take the money and run.
Now, if you continue to refuse their offer the insurance company will say "this is our final offer" and if you don't like it, take it to arbitration.
For many of you reading this... this probably seems very familiar.
How We Got an EXTRA $2,700 Payout for a Total Loss Car
This extra payout was not from refusing the insurance company's first offer and we didn't have to go to arbitration... we had an ace up our sleeve they didn't expect... but more on this in a moment.
First, I should talk about the initial offer the insurance company puts on the table. If you take the dollar value of their first offer and look around the Internet for similar cars, you will most likely find many other cars being offered for sale for a very similar amount as their cash offer. The insurance companies know you will do this and that is why their offer seems to be in line with what is for sale for a similar vehicle.
So if you do refuse their first offer and they bump up the offer a few hundred or a thousand it appears like you are getting top dollar... but you are not.
The truth is, they have a cash value appraisal which is evidence of the market value of your vehicle. If you do not have a similar document (but with a higher cash value conclusion) you are fighting an uphill battle. It's like that cliché "taking a knife to a gun fight". However that was not what we did, we just brought a bigger gun to the gun fight.
Our ace in the hole was having our own cash value appraisal.
How did we do it?
In fact, creating your very own cash value appraisal isn't as hard as you may think. Sure it sounds complicated but so are most things before you see how they are done.
To start, we did what everyone does in this situation and searched the Internet for similar vehicles. Once we found three vehicles we felt were the closest in comparability, we adjusted their sale price to account for any differences between the total loss vehicle and the comparable vehicles.
The adjusted dollar value came out to $3,700 more than the insurance company's offer. I know... I know, I can hear you already saying, " You said it was $2,700"! You are right.. but the $2,700 was what we accepted after just a couple phone calls.
We could have pushed for the full $3,700 difference but may have had to go to arbitration to get it. If we did choose that route, at least we had cold hard market evidence to back up our claim.