Negotiating a Total Loss with Your Auto Insurance Company

In the 2011 JD Power Auto Claims Satisfaction Study, JD Power reported car insurance customer’s satisfaction with their auto insurance claim was 42 points lower when their car was a total loss, compared to car insurance customers having their cars repaired. JD Power states 50% of customers with totaled car insurance claims surveyed expressed dissatisfaction with the settlement amount, claiming the money was not enough to buy a comparable car as a replacement.

For the 2011 JD Power study, the industry average score for auto claims satisfaction for customers with totaled car claims is 811 points on a 1,000 point scale. Customers with auto claims where their car was repaired, instead of totaled, rated their claims experience as 853 out of 1,000 points. Customers with totaled cars are less satisfied with how their claim was handled. This blog post will give you the information you need to help you avoid feeling ripped off by your car insurance company, and settling for less money than your car is worth, if your car is totaled by an auto insurance company. About 1 in 5 auto physical damage claims result in the car being totaled.

When will your car be considered totaled?

Generally, your car is considered totaled when the cost of repair is more than the value of the car. Your insurance company’s claims policy and state law will determine repair cost at what percentage of the value of your car will result in a total loss settlement.

For example, your car’s market value is $5,000, and it will cost $4,000 to repair your car. Since your state requires any car be totaled when the cost of repair is 80% or more of the market value of the car, your car will be considered a total loss.

Some states may require cars, with damage as little as 50% of the market value of the car, be totaled. Some states will require the cost of repair to be as much as 100% of the car’s market value.

However, if state law requires cars to be a total loss, if the cost of repair is 80% or more of the market value of the car, your auto insurance company is not prohibited from totaling your car at a lesser percentage, say anything over 50%.

My insurance company wants to total my car. What should I do?

Refer to your state’s department of insurance website to learn your rights, and what expenses are covered. Some states may have more information, better consumer protection laws, and enforcement than others. The website, at the least, should have a contact phone number to call for assistance with your questions. You can find the website for your state on my website here: US state department of insurance websites

Some states require insurance companies to cover the cost of sales tax, based on the market value of your totaled vehicle, and title and registration fees, in addition to paying you the actual cash value (ACV — basically the market value) of your totaled car. Insurance companies may cover these additional expenses, even if they are not required by law. But whether the law requires them to be paid or not, you need to ask for them to be paid, and you must do so promptly, usually before 30 days from the purchase of your replacement car has passed.

Your state department of insurance can inform you of other state laws & regulations, too.

For example, here in Oregon, your appraisal costs up to $1,000 must be paid by the insurance company, if the insurance company agreed to a higher appraisal amount than before you hired the appraiser.

Should you ask to keep your car if the insurance company decides it is a total loss?

Your auto insurance may allow you to keep your totaled car, if you let them know you want to keep it promptly.

If you don’t want to keep it, the insurance company sells it at auction and keeps the proceeds. The proceeds are the salvage value.

If you wish to keep the car, the auto insurance company deducts your car’s estimated salvage value from your claims settlement check. Here is how it would work:

$10,000 market value or ACV – $500 deductible = $9,500 claims settlement, and the insurance company sells your totaled car for salvage and keeps the proceeds.

$9,500 – $1,500 Salvage value = $8,000 claims settlement and you keep your totaled car.

Your auto insurance company may decline to let you keep the car if you have a late model, popular car with valuable parts, and a high salvage value.

Keeping your car might be a good choice if the damage is cosmetic. For example, if your car was totaled because of parts stripped from it in a theft, and you know you can buy replacement parts, and get them installed, for less than your claims settlement check, after the salvage value has been deducted.

However, if there is substantial damage to your vehicle, amounting to close to 50% of the value of the vehicle, you may want to consider requesting it to be totaled, even if the insurance company has not said it is totaled. Explain to your adjuster there is likely to be hidden damage, or structural damage, possibly to the frame, which cannot be properly repaired.

Keeping your car, once it has been totaled, after receiving major damage in an accident has its hassles — getting the repairs completed on your own, the vehicle inspected, re-titling it as a salvage title, suffering the diminished market value if you were to sell it, is usually not worth it.

Also, you may find an insurance company willing to insure it for liability, but most insurance companies will not insure it against physical damage (Comprehensive & Collision coverage, or in slang terms, “Full” coverage), once it has a salvage title.

Settling a total loss with your car insurance company

Claims representatives use computer software, to compare recent sales in your area of similar vehicles to your totaled vehicle, to determine your settlement. Claims representatives don’t intentionally low ball you. They want to give you a fair settlement. But they are busy settling a lot of claims, and have no incentive to spend a lot of time to give you the best settlement possible.

YOU need to make sure you are really getting what your car is worth. Consider doing the following:

Ask to see the evaluation report showing the comparable sales.

Is your car worth more than these cars from the comparable sales? Does you car have less mileage? Does it have after market equipment, or a unique trim? Make sure you know the true value of your car and how you can prove that value. The more documentation you have, like receipts for rims & stereo equipment, or pictures of the car’s interior and exterior prior to the damage, will help you establish the value of your car before it was damaged. Make sure your claims representative compares cars which are truly close in kind and quality to your car.

Are any of the comparable sales outside your local market?

What a similar car may sell for in a depressed car sales market 75 miles away from your home, may not reflect your local sales market.

Do your own research.

Call local dealerships and ask about recent sales for a car similar to yours. Use the online car valuation tools at or You can also use classified ads, but remember, the claims representative will not base the value of a car on the price people would like to get for their car.

A guy asking $10,000 for his 2005 Saturn, when no one would pay more than $5,000 for it, will not help you get $10,000 for your 2005 Saturn.

One negotiating tactic you can use is to ask the claims representative to drop the lowest comparable sales from the average.

For example, If the claims representative gets an $8,000 average price for the market value of your car by comparing 5 recent sales, ask the claims representative if they can drop the two lowest sales comparisons. This will bring up the average:

Car 1 sold for $10,000
Car 2 sold for $9,000
Car 3 sold for $8,000
Car 4 sold for $7,000
Car 5 sold for $6,000

Average = $8,000

But, if you use only the top 3 sales:

Car 1 sold for $10,000
Car 2 sold for $9,000
Car 3 sold for $8,000

Average = $9,000

You would get $1,000 more for your car.

If you can’t come to an agreement over the value of the car with your insurance company, contact your state department of insurance (as listed above) to find out your rights to appeal, hire an independent appraiser, and file complaint, if needed.

It’s not unusual for people to think their car is worth a lot more than it’s really worth. But you need to question the insurance company’s estimate of its worth to make sure it really is fair. If your car is worth more than the insurance companies offer, you need to be able to explain why.

Many people pay too much for their insurance because they never shop for better rates, or if they do shop, they don’t check the rates of enough companies. For a lot of people, the best insurance company is the one with the lowest rates. The ad below will take you to links to get online quotes from leading Home, Auto, Health, & Life insurance companies in your area. Choose the type of insurance, put in your zip, and start shopping now!

Have you had a car insurance total loss? How did it go for you? Tell me about it. Please leave a comment on my facebook page. Follow me on Twitter for important insurance consumer news and new blog entries at CarInsWatch.