QuestionQUESTION: After having an accident, I had my vehicle towed to the auto body shop my insurance company recommended. After receiving an estimate from the shop, my insurance company decided to total out the vehicle. I currently owe $12,000 and they are wanting settle for $5,800. What happens now? Can I get a second opinion from a different shop, or am I just left with paying $6,000 for a vehicle I no longer have? Also, if I am stuck with paying the difference, why does the insurance company get the title? Can the lienholder and the ins. co. work together to get the vehicle written off? FYI I have not yet signed any legal documents agreeing to anything.
ANSWER: Hi Tricia,
When a vehicle is totaled the insurance company is responsible for paying you the fair market value of your vehicle not the finance balance. In this case it seems that you either financed the vehicle at an extreemly high interest rate or rolled a previous balance into this purchase. In either case the insurance company in not responsible to pay off your finance contract only the value of your car. When the insurance company pays you (or the finance company) the value of your car, they are essentially buying the car from you and that is why they get the title. The insurance comapny will then sell the salvage to reduce their loss.
It is possible in this case that the insurance company is not making you a fair offer for the value of your car.
The Total Loss Claim Process
Step 1: Determining the vehicle to be a Total Loss
When you are involved in a collision, you will report the claim to either to your own insurance company or the insurance company of another at-fault party. The insurance company will assign a damage estimator to inspect the damage and write a repair estimate. Once the estimate is written, the repair cost will be compared to the value of the vehicle. Generally, insurance companies will declare a vehicle to be a total loss if the cost of repairs is more than 70% to 80% of the vehicle's value.
Step 2: Doing Your Homework
If you have been informed that your vehicle is a total loss, the insurance company will then take usually a couple of days to determine the value they are going to offer you. During this time, you should do your own research to determine the fair market value of your vehicle. The easiest way to do this is by using the internet. You should check www.autotrader.com . There you can search for currently for sale vehicle like yours, in your area. You should try to locate 5 to 10 vehicles of the same year, make & model, with similar options and mileage. Print out the listings you find and average the values. This will give you a good average value to use as a baseline. However, you must understand that the prices you find are asking prices and virtually all of those prices will be negotiated downward to some degree. Now when the insurance company makes you an offer you will know if it is within a reasonable range or not.
Step 3: Negotiating and Settling Your Claim
Now that you know what your vehicle is worth and what the insurance company is offering you, it is up to you to negotiate if the offer is not reasonable. You can start by sending the documentation you collected in step 2 above and making a demand of what you are seeking to settle the claim. If the insurance company does not properly negotiate with you then you may have to hire a professional vehicle appraiser to properly establish the value of your vehicle. If you are dealing with your own insurance company you can invoke the appraisal clause of your policy. This is a part of your policy that is there to help settle disputes in value between you and your insurance company.
I hope this helps
Richard Hixenbaugh
---------- FOLLOW-UP ----------
QUESTION: What about my question regarding a possible write-off by my lienholder? Would it hurt to ask them about that? Also, what about getting a second estimate on the damage?
AnswerHi Tricia,
The decision to repair or total a vehicle is completely up to the insurance company. The vehicle owner has no say in the matter. So getting another estimate would do no good. Also, generally the estimate written by an insurance company is less than will actually be needed to repair the vehicle due to hidden damage that can not be seen until the repairs are started.
As for the balance of your loan; most finance companies will not just write off the balance. Some may negotiate with you a little. You would just have to call them, explain the circumstances and see what they may be willing to do. However your finance contract is a legally binding contract, so they may not be willing to do anything.
I hope this helps
Richard Hixenbaugh
