What Do Insurance Companies Use to Value Total Loss on Cars?
If your insurance company declares your vehicle a total loss, it means the cost of repairing the vehicle is too close to its market value. The Auto Insurance Tips website states that a vehicle that needs repairs equaling as little as 50 percent of its value might be considered a loss, although the total percentage differs by state and insurer. Your insurance company will offer a value for your vehicle based on its own research methods.
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Appraisal Guide Values
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Some insurance companies may recognize one or more appraisal guides to help determine the value of your vehicle. You can ask your insurance company which value it uses, but most use Kelley Blue Book, NADA Guides or Edmunds.com. Some may consider a median of the three values. You can research your car's value yourself online at any of the guide's websites. Choose the vehicle's retail value to determine the amount you should receive for your loss.
Local Values
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Market conditions affect the value of a vehicle. While book values help insurance companies determine a round-about value for a vehicle, insurance companies also research the value of your vehicle based on your area. Using your local classifieds and dealership sales, the insurance company tries to find like vehicles with the same year, make, mileage and features as your car. If the insurance company can't find an exact match, it may estimate your car's local value by increasing or reducing the car's price by options or features it has or doesn't have.
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Vehicle's Condition Before the Accident
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Your insurance company will also have your vehicle appraised, even though it's damaged. An appraiser inspects your vehicle to determine its condition before the accident. Stained or ripped seats, stained carpets, low tire tread, rust, cracked windows or missing accessories, such as the radio, decreases the car's value. After obtaining an average value from appraisal guides and local sales, the insurance company deducts wear-and-tear or damage cost to reflect the car's condition.
Considerations
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If you have a deductible and your insurance company is paying for the loss, subtract your deductible amount from the value. If someone caused the loss and your insurance company is handling the claim, the other person's insurance company will reimburse your insurance company for your payment. The other insurance company will also reimburse you for your deductible. If you have a loan or lease on your vehicle, your insurance company only pays the vehicle's market value, not necessarily the balance on your loan. You might still have to pay your loan or lease balance after the insurance pay off.
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