Auto Insurance Claims: What happens when an Insurance company deems a car totaled, kelly blue book, preferred repair shops

Question
My son has a '97 Ford Probe that was in good condition. He was hit in the rear, crushing in the bumber area and trunk area of the car, but leaving it driveable, albeit with the tail lights duck taped on, but working.

The person's insurance company has accepted full responsibility and given him 4 "preferred" places to have his car assessed for repair. The first quoted almost $5,000 which is more than the Kelly Blue Book retain ($4,295) or wholesale ($2,995) value of the car.

What happens if all the quotes come back like this? If they deem it's "totaled" and make an offer, does that mean he takes the offer and keeps the car or they keep the car and he's stuck with just the cash? (litagation aside)

The damage doesn't look nearly as bad as the quote would indicate.  I'm wondering whether the "preferred" repair shops have an incentive in cases like this to keep the quote high so that the insurance company can declare the vehicle "totaled" and negotiate a cheap, quick settlement.


Answer
Dear Chris,

First of all, you can take that car to any shop you wish for repairs. There are no laws that require you to spend your money where an insurance company would like you to. These shops are typically the lowest cost providers of repair services. However, I do not think they would purposely overestimate the damage to total the car. That does nothing for the shop and they don't make any money like that.

What the damage looks like to you could be deceiving. The Probe is a unibody vehicle and the chance of it having sustained structural damage in the impact is very likely.

If the car is totaled, which I suspect is the case, that insurance company owes you the cost of replacing it with one of like kind and quality, plus sales tax and license transfer fees. This means the actual cost, or actual cash value. If the book value they use for their offer is sufficient to do this, then you have to accept. This does not mean you have to sell the wrecked car to them for that price and can elect to keep it and do what you wish with the car. The problem is that state laws often require them to brand the title to the car as having been a total loss. You can still keep the car and repair it, however.

Charlie