How Does
How Does an Insurance Company Decide on the Value of a Totaled Car?
NADA Valuation
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The insurance company will decide the value of a totaled car after an accident by looking at several factors. The first and foremost is the NADA value. NADA stands for National Automotive Dealers Association. It is like the Kelly Blue Book in that it gives up-to-date market values of used cars. This is the company that nearly all businesses go to to find out the real market value of a used car. NADA keeps a very accurate listing of used car values, which reflects current sales prices from around the country.
Analyzing the Value
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A car insurance company will contact NADA to find out the exact value of your car on the day it was totaled. They will get a valuation from NADA in numerical form. For a 2005 Honda Prelude, they may get a number like $7,500. This will have taken into account the vehicle's mileage and options like A/C and safety features that would have been reported to your insurance company when your claim was opened. In most cases they will stick right to this number.
Custom Options
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If you have made customizations to your vehicle like adding a new stereo or suspension it may or may not be covered under your insurance policy. Added customizations like a new set of subwoofer amplifiers are an item that would need to be insured separately. If they were damaged in the vehicle, your policy for the subwoofers must cover damage by a car collision for them to be replaced. Additional items that would increase the NADA value of the car include added options that you can buy with the vehicle, like a supercharged engine, or additional features that came with the car, like a sunroof or advanced transmission.
Deciding if the Car is Totaled
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The insurance company, after comparing the data from NADA, will then compare this to the total cost of repairs. The mechanic who inspects your car will prepare the quote, which includes the cost of parts, labor and any other diagnostic work that needs to be performed after repairs are made, including alignments and safety inspections. If the value of the car from NADA is less than the estimate for repairs, the car is totaled.
eHow Article: How Does an Insurance Company Decide on the Value of a Totaled Car?
