Having your car totaled in an accident can be traumatic enough, but then you get to debate the insurance company's claims adjuster about how much it was worth. How much your insurance carrier will pay for your car is covered in your policy's fine print, but setting the value is as much art as science. To get the maximum money for your smashed up car, you should know what yardsticks insurers use and what options you have.
Your insurance company will pay what it determines to be the market value of your car. This value is what it would cost to buy an exact clone of your car from dealer in your area. Of course, used cars are all different, so the insurance adjuster will look at the prices of cars of the same make, model, mileage and options as your totaled vehicle. The insurance company should use prices in your area for the comparisons. The result of the adjuster's research should be what it would cost you to replace your car with a similar vehicle.
Settling the Final Value
The insurance payoff for your car will include the costs involved with buying a car. After the fair market value of the car has been determined, sales tax, registration fees and any other costs typical for your area will be added to the total. If you do not agree with the value proposed by the insurance adjuster, you can negotiate with the insurance company. To be successful, you need evidence to back your assertion that the adjuster came up with a value that was too low for your car. The insurance company's offer may not be the final offer, so make sure you agree with, or at least understand, the valuation of your totaled vehicle.
Negotiating Vehicle Value
If you do not think the value offered for your car accurately reflects the actual worth of the vehicle, you can dispute the offer and give reasons why your car is worth more. You might have a valid argument if you have added value to the car by recently replacing and upgrading the transmission or installing a high-end stereo system. The insurance company gets salvage value from your totaled car, and upgraded components may increase the value on that end, making it easier for the adjuster to give you more. Another reason would be that the value for your model is higher in your area than the comparative values found by the insurance adjuster. You need to find similar cars for sale near you that show a higher asking price.
The Loan Balance
The amount the insurance company pays on your totaled car has nothing to do with any loan balance. Because you no longer have the car, however, you must pay off the loan before you get another one. If the insurance value is more than the loan balance, the insurance company will pay off the car loan and give you the rest of the money to use as a down payment on a new car. If you owe more than the insurance will pay, all of the insurance money will go to the lender and you will be responsible for making up the difference.
Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.