<p>They may use a threshold of 70% of the estimated value of the car, in order to deal with cost overruns during the repair, since there can be hidden damage not visible in the initial estimate.</p>
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<p>A proper total loss payout will be the amount that it will cost you to buy another similar car (including sales/use tax and pro-rated license costs), not the somewhat lower amount that you can usually sell your car for (assuming transaction with a dealer in both cases). The insurance company should show you the survey of similar cars for sale and recently sold at local dealers if you ask – though if the car is rare, the “comparable” cars might not actually be that similar.</p>
<p>If you want to keep the car, the payout will be reduced by the estimated value of the damaged car at a salvage auction. This typically involves converting the car’s title to a salvage title (which generally makes it unsalable for any more than beater value). But if the car was already an old beater that received only cosmetic damage, the owner may not care that it has a salvage title.</p>
In most states, that’s actually not true. The proper payout is the depreciated value (then-current market value to the owner) of the vehicle - it is what you could sell it for. That determines the value to the insured. The value to a buyer may be somewhat higher, but the insured is the seller. The insurance is to make you whole - what you could have gotten if you sold the car. Not what you could buy a similar car for.</p>
<p>Where I live, quite a few years ago (late 90s), my car was hit and eventually was viewed as totaled. It was 3 years old, low mileage, volvo. They initially were going to repair it, and worked on it some, and after a couple of weeks something about the frame being bent came up. I got a value based on advertising for comparable models in pennysaver type papers from the surrounding areas where I lived. In addition to the car value (they showed me all the ads) I got the sales tax. It ended up being 80% of what I had paid for the car, 3 years previously. I thought it was very fair. It was only 60% of the cost of the volvo that I bought to replace it. I am still driving that replacement, many years later. I had to sign over the totaled car title, and its salvage value was listed as around $5000. I had just replaced a wheel on it about a month before the accident ($500), so I think they could get money for the undamaged parts (like the engine and wheels.)</p>
<p>To me the moral of the story is find out how they come up with a value when you get an offer, and then try to see if this is proper before you agree.</p>
<p>Making you whole in the case of an involuntary sale due to the car being destroyed and being declared a total loss means giving you enough to buy the same car to replace the destroyed one. Or (in theory) buying another of the same car and giving it to you.</p>
<p>For example, if you could sell your car for $10,000, but it would cost you $13,000 to buy another of the same car, and you have no intention of selling your car, then if your car is destroyed, the insurance payout should be $13,000. If you only get $10,000 and then buy another of the same car to replace the total loss car to get back to where you were before the incident, you will be out $3,000 – not exactly being “made whole”.</p>
<p>In actual practice, I have seen the valuation documentation on a total loss settlement. They used actual selling and for sale prices of used cars at nearby dealers to compare prices to the total loss car in order to get a valuation. Then sales/use tax and pro-rated license was added to get the settlement amount.</p>
<p>Where the valuation may be inaccurate is if the total loss car is rare (so similar vehicles are hard to find, so not-that-similar cars are used for comparison), or where the cosmetic, odometer mileage, and mechanical condition differ greatly (valuations tend to be based on the cosmetic condition of the undamaged parts of the total loss vehicle and the odometer mileage; mechanical condition is not considered).</p>
<p>My state does not define “making whole” the way Ucbalumnus defines it.
My state would think of it as paying me the market value of my car at the time of the loss. It would not be paying for the cost of a similar replacement.</p>
<p>DS totaled our two year old car back when he was 16. We wound up with a check from Travelers for almost over $1,000 more than the car originally cost. At least here in Illinois, ucb’s method seems to be followed. (Basically they gave us enough to buy a current model out the door.)</p>
<p>After his accident our rates went up so much it was cheaper for us to move to Chubb - typically one of the more expensive insurers, but with a much more comprehensive contract. Chubb policies are “agreed value”. The amount you will receive if your car is totaled is specified on the policy declaration and always exceeds the KBB or other valuation estimates- and can be negotiated if necessary. As ucb noted above, if you have an expensive or unusual vehicle, “agreed value” should definitely be investigated since the usual ways of determining a proper payout may not work.</p>
<p>Would you consider it a fair deal if a car dealer came to you and forced you to sell your car at trade-in value? If not, do you think that if your car were declared a total loss and you were given only trade-in value (the equivalent of being forced to sell at trade-in value, even though you may not have wanted to sell the car) to be a fair definition of being “made whole”?</p>
<p>I don’t think it fair that I’m 5’10". I’d want to be 6’. It isn’t fair that I might lose my car because someone else ran a red light. I fully understand a car I have worth 10k might get totaled, and that an exact replacement(if such could be found) might cost more than 10k. What I personally think of as fair has no bearing on how those I may do business with define being made whole. Those are 2 very different meanings. All car payments after a loss are negotiable, and of course I’d be likely to try to negotiate upward if my costs to replace would be greater than my exact damages. But my desire to negotiate does not change our state’s definition of being made whole.</p>
<p>ucbalumnus, you assume that there is something “fair” about insurance or even tort law. It’s not.</p>
<p>Your state may have different rules for insurance. The ones that I and younghoss live in (and athe ones in which I am admitted to the bar) all define the value of a total loss is, in your words, a “forced sale.” It is the market value, from the point of view of the seller, not from the point of view of the buyer. It is not intended to allow you to purchase a similar car.</p>
<p>Don’t believe me? Spend some time watching The People’s Court and you’ll see the type of valuation I’m describing.</p>
<p>Perhaps your state allows insurance companies to short change claimants with a stingy definition of “made whole”, but what I have seen here is that the total loss settlement offer will be based on a survey of sales and offering prices for similar cars at local dealers, plus sales/use tax and pro-rated license costs (on request, the insurance company gave the documentation listing the similar cars and valuation adjustments).</p>
<p>Guess that means that in your state, you are actually buying less insurance than you think you are buying, as far as coverage for your car is concerned.</p>
<p>I’ve worked in insurance for 30 years and I agree with ucbalumnus. In my state, we owe you for the actual cash value of your vehicle at the time of the loss, which is basically the market value, but the market value is determined by what a similar vehicle is selling for in your area. If Joe Blow down the street is selling his 2005 Civic for $8000, then why can’t you sell yours for that? I don’t think that the “market value, from the point of view of the seller,” is different from the point of view of the buyer. My D was hit by a driver with a different insurance company than the one I work for and her car was totaled. They offered me an amount for the car that I thought was too low, let’s say $2000. I did a search at autotrader.com for the same year, make, model within a 100 mile radius of me and found the same vehicle for sale for a broad range of amounts, from $3000 to $6000. The other insurance company ended up paying $4500 (the average asking price.) The insurance company will use the “book” value as a starting offer, but it is negotiable if you can show where the same model with similar mileage and condition is going for a different amount in your area. You can’t just arbitrarily pick an amount, though; you need to have actual evidence to back up the value.</p>
<p>When my dads car got totalled a few years ago, it was only 4 or 5 years old but had 160k miles on it. He was surprised by how much he got from the insurance company based on it’s miles. They basically did a print out of all of the same model cars as his from the local area and averaged the costs together and gave him that amount. He wound up buying the exact same car again from the listings. It worked out in the end… he got the same car with like 120k less miles for only like $2,000 dollars difference in cost.</p>