How Does the Insurance Industry in New Jersey Determine a Value for a Total Loss on a Vehicle?
You may have an automotive insurance policy with the best customer service in the world and an outstanding claims representative, but sometimes that's just not enough: When cars receive heavy damage following an accident, sometimes insurance companies in New Jersey must write a car off as a total loss rather than face repairs that aren't cost effective. While owners want to receive the best appraisal on their total vehicle, state regulations largely define the three methods an insurance company may use to calculate its value.
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Book Value
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The most common method used to determine a car's value is by indexing it against the average retail value of a similar make and model car. While the law allows any index with a suitable number of samples to provide an accurate average price, most adjusters rely on the National Marketing Reports "Auto Blue Book" or the "N.A.D.A. Used Car Guide," an updated list of car values to determine the loss value of a vehicle. With this method, as well as the other two, adjusters may reduce the car's value if it suffered prior damage, such as rust or bent fenders. No New Jersey regulations dictate the method used to deduct the value of prior damage.
Actual Purchase Price
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Adjusters may also value a totaled vehicle using more empirical data, valuing it at the advertised price of a similar vehicle for sale in the beneficiary's area. The adjuster must obtain a written quote for the vehicle -- either the same make and model or one of "substantially similar" nature -- and use that quote to value the totaled vehicle. The for-sale vehicle an adjuster selects upon which to base the appraisal value must be within 25 miles of the beneficiary's home.
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Database Price
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Market-value databases are simply the computerized version of the blue books that have long been the foundation for insurance adjusters' appraisal values when considering a vehicle a total loss. New Jersey allows insurance companies to use the ADP or CCC databases as a means to determine a car's average retail price. Other databases may not include enough data to present an accurate portrayal of the totaled vehicle's actual value, and the state bars insurance adjusters from using them.
Determining Total Losses
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In some cases, a damaged vehicle's value must be determined before it can be declared a total loss. In the case of catastrophic damage, it's easy to write a vehicle off as a loss, but small amounts of damage on older cars may necessitate a total loss. Insurance companies consider a car a total loss if the cost to repair it exceeds its value. Other times, insurance companies may total a vehicle if the repairs to it would make it unsafe to drive.
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References
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