How Do I Fight My Auto Insurer on a Totaled Car Payout?

You just received a settlement offer from your insurance company after it declared your car a total loss, but the payout seems too low. What now? Here’s how to fight your insurance company if they don't offer to pay enough for your totaled car.

Prepare to fight your insurance company over a totaled car payout

As you prepare to fight your insurance company over your totaled car, you’ll need to check your insurance policy and your car’s value.

How much will insurance pay for my totaled car?

The most your insurance company will pay for your totaled car is its actual cash value. This is the estimated price it would fetch in a sale based on its mileage, pre-accident condition, the price of similar cars in your area and other factors.

Insurance usually only pays for modifications or custom features if you’ve purchased additional coverage for them. Otherwise, your settlement is usually based on your vehicle’s stock value, after depreciation.

If the insurance company applies your collision or comprehensive coverage to the claim, it subtracts your deductible from your settlement.

Where can I find my car’s actual cash value?

You can usually obtain a free estimate of your car’s value on the websites of organizations such as Kelley Blue Book (kbb.com) and the National Automobile Dealers Association (nada.org).

What if my insurance does not pay enough for my totaled car?

Fighting your insurance company when it does not pay enough for your totaled car is a process that tends to get more complicated and potentially more expensive with each step.

Step 1: Contact your insurance company

Your first step in disputing the value of any claim is to contact your insurance company’s adjuster or claims office. Since you don’t have to accept their first offer, it’s good to take this step even if you think the insurance company’s value of your vehicle is just a little low.

• Find out how they arrived at your vehicle’s value.
• Point out any inaccuracies they may have about your vehicle.
• Be prepared to provide supporting documentation. Maintenance and inspection records, for example, can show that the vehicle had fewer miles on it or was in better condition than stated by the insurance company’s adjuster.

Step 2: Hire an appraiser

Most insurance policies include an appraisal clause for resolving disputes over the value of a claim. You and the insurance company each hire your own appraiser and split the costs of a third appraiser, who acts as “umpire” by deciding which appraisal is accurate.

Step 3: File a complaint

The outcome of the appraisal process is binding, but if you’re not satisfied, you can file a complaint with your state’s insurance commissioner. Insurance companies are required to cooperate. Any supporting documentation you provide to state investigators will only strengthen your case.

Step 4: Consider mediation, if available

Some states, including California and Florida, offer free or low-cost mediation for insurance disputes that meet certain criteria. You and a representative from your insurance company meet with a certified mediator who attempts to facilitate a non-binding resolution. You typically don’t have to bring an attorney, but you usually can.

In California, you can request mediation on collision or comprehensive claims exceeding $7,500, when more than $2,000 is in dispute. But you have to complete the insurance commissioner’s complaint process, first. In Florida, auto damage claims of any amount are eligible for mediation.

Step 5: File a lawsuit.

If all else fails, you can sue the insurance company.

When is a car considered totaled?

In general, insurance companies declare a car totaled when its repair costs exceed its actual cash value. However, your state’s titling laws may require the insurance company to declare the car a total loss even if its repair costs are less than this.

Titling laws are important, because they specify a state’s total-loss threshold. When damage to a car exceeds this threshold, it receives a salvage title, which prohibits it from being driven on public roads unless it is rebuilt and passes a safety inspection.

Many states require a salvage title when repair costs are a certain percentage of a vehicle’s actual cash value, such as 70% or 80%. Others require a salvage title when the sum of a vehicle’s repair costs and its salvage value exceeds its actual cash value. A vehicle’s salvage value is the sum of the value of its parts when they are sold for scrap.

Insurance companies also usually have discretion to declare a vehicle a total loss when repair costs are less than your state’s total-loss threshold.

What if I don’t agree that my car is totaled?

If you don’t agree that your vehicle is a total loss, you usually have to show that the repair costs do not exceed its actual cash value or your state’s total-loss threshold.

This typically requires evidence that the insurance company’s estimate of your car’s value is too low, as described above, and/or that its repair estimates are too high.

While it may be difficult to lug a severely damaged car from shop to shop to get multiple estimates, you may be able to show the insurance company’s estimate to your own mechanic to see if you can get a lower estimate.

If you want to keep your vehicle after it is declared a total loss, let your insurance company know. If your state has no restrictions on this, the insurance company can have the salvage title kept in your name and deduct the vehicle’s salvage value from your settlement.

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