What would you do if your car was heavily damaged in a wreck? Would you
repair it, or would you buy a new one? In most cases, your insurance company
will make that decision. Its decision is based on state law that requires
a car to be totaled out if the cost to repair exceeds 80% of its value.
It’s also based on the insurance companies internal policies.
Some total out much lower than required by state law, some as low as 51%
of the value. Once the car is totaled, the insurance company pays the
actual cash value less the deductible amount to you and sends the car
to a salvage yard to be sold at auction for parts. It keeps what the scrapped
vehicle sells for at auction.
If you loved Old Nelly and can’t bear to part with it and want to
get it repaired despite the cost, the insurance company will probably
pay you the same, except that it might deduct what it figures it could
have sold the car for at auction. Then, you could pay out of your pocket
for Old Nelly’s repairs. A common complaint from people is that
“my insurance company didn’t pay me enough for my car.”
They think Old Nelly had a higher value than the company placed on it.
Some good places to look for value are Edmunds.com, Kelley’s Blue
Book or NADA. Input things like your car’s equipment, mileage, general
condition before the wreck, and your zip code. In seconds, those sources
will compute the average value of your car. You can compare those figures
with the insurance company’s offer and argue for a larger payment.
Another option is to hire an independent appraiser to inspect your vehicle
and write a report that you can give to the adjuster. Body shops will
put you in touch with appraisers.
Also, one thing to keep in mind, if you purchase a new car, you may want
to consider purchasing GAP insurance. Particularly if you have a loan.
You can keep the insurance in place until your loan payment is lower than
the value of your car.
Finally, you have the option to hire a lawyer to increase the odds of getting
a higher payment, but you have to ask if the fight in court will be worth
it. The best thing to do? Stay alert, and avoid a wreck!