How an Insurance Company Considers a Car Value
When shopping around for car insurance, most drivers do not fully understand how their insurance works. It is not until you are in a car accident and your vehicle is damaged that worry sets in. Even in this situation, things are not a total loss. Knowing how an insurance company considers your car's value and understanding your rights may save you from a disastrous situation.
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Diminished Value
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When a car has been damaged, the value of that car automatically decreases. Even if the car is restored to look as it did before the damage took place, the car looses value. An insurance company calls this difference in value the car's diminished value. To determine the diminished value of a car, a third party appraiser examines the car and reports its findings to the insurance company. An insured party can then submit a claim to the insurance company asking to be paid the diminished value of the car.
Total Loss
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An insurance company may choose to list a car's value as a total loss, or totaled. This does not always mean the car is not repairable. An insurance adjuster examines the car to determine if the damage is repairable and if so what the cost of repair is. If the estimated cost of repair exceeds a certain percentage of the car's value, the car is considered a total loss. Most insurance companies do not allow repair costs to exceed 60 to 80 percent of the car's value.
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Condition Rating
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Insurance companies also asses a car to provide a condition rating. The ratings are based on the existing condition of the vehicle and include exceptional, above average, normal and below average. The best rating is exceptional and is only given to a vehicle when it is new. The areas that are rated during condition rating include the vehicle's trim, windshield, tire tread, engine condition and seats. Once the condition rating is completed the adjuster factors in any variables the vehicle may have such as mileage and wheel condition and features such as a CD player or a moon roof.
Challenging the Insurance Company
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If a driver is in disagreement with the insurance company's estimate, legal action can be taken such as arbitration. But before legal action is taken, attempt to resolve the issue with the insurance company directly. By providing records of oil changes done every 3,000 miles and routine maintenance, a driver may increase the value of a vehicle. Collect at least three price quotes from local dealers and submit the quotes to the insurance company. Ask for the value of the vehicle to be reassessed with all the gathered data in mind.
Added Protection
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Added protection for the value of your vehicle is always available. Consider obtaining an insurance that covers the difference between what the standard insurance pays and what is owed on the vehicle. This type of coverage is also known as gap insurance.
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References
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