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

If your car is totaled in a crash, you may not agree with your payout. Learn here what courses of action you can take.

When a car is deemed a total loss by an auto insurance company, they will pay out on the claim by calculating the market value of the car. While the payout that results from this formula can be fair, you may feel that the amount they offer you is unsatisfactory.

Fortunately, you are not obliged to take the first offer from your car insurer. There are plenty of options for negotiating your payout amount, hopefully making litigation unnecessary. There are even courses of action you can take if you want to keep your car after it is titled as totaled, but you’ll want to think deeply as to whether or not that is your best option. This article will cover:

Definition of a total loss

If your car suffers major damage after a crash, what happens to it afterwards is up to your auto insurance provider. They may pay for the repairs, but if they decide the damage is such that it is not worth repairing, they may call it a total loss.

A total loss is not an arbitrary decision. Auto insurers will look at the estimated cost to repair your car. They will then compare that total to the value of your car. If the total cost of repair is close to the car’s market value, it’s likely totaled.

Each state has its own laws that set a standard for when a car is totaled. States either use a threshold or a total loss formula. The average state total loss threshold is usually 75% of the car’s actual cash value, which means a car is totaled if the cost of repairs cost 75% or more of the car’s actual cash value. Actual cash value is the dollar amount your car is worth before the accident.

Some states don’t have total loss thresholds and use a total loss formula (TLF) instead. TLF is the cost to repair the car plus its salvage value. If that total is greater than your car’s actual cash value, or the market value of your car, it is considered totaled. The following table gives you a brief look at how states decide if a car is totaled.

State Threshold/TLF State Threshold/TLF
California TLF New York 75%
Florida 80% North Carolina 75%
Georgia TLF Ohio TLF
Illinois TLF Pennsylvania TLF
Michigan 75% Texas 100%

To see how each state handles totaled cars, read our article on what happens when your car is totaled.

What happens if my car is totaled?

If your car is declared totaled, your auto insurance company will reimburse you for the actual cash value of the vehicle minus your deductible. Your insurer will then probably be given a salvage title to the car and auction it off for parts. Your auto insurer will keep the money made from the auction to help recoup its costs.

How to fight your auto insurer’s claim offer after a total loss

Your auto insurer’s estimated payout value may not be near the number you’re looking for. If you are unsatisfied with the offer, you can negotiate your car's value.

Appeal the total loss

If you’re unhappy with your auto insurance company’s payout, they usually have a process for appeals. This is a best first step under most circumstances, and insurers tend to be open to appeals. They don’t want to go to court over a disputed claim amount any more than you do.

Talk to the adjuster

Your auto insurer may have you meet with one of its adjusters. The adjuster acts as their advocate in your claim dispute. Before negotiating your car value with the adjuster, do your homework. If you have a police report of the accident, as well as eyewitnesses, these could help immensely if how much you were at fault is an issue.

Get appraisals

Look at the current edition of the Kelley Blue Book to get a good idea of what the current market value of your car was before the accident. Go to a mechanic you trust (visiting more than one is a good idea if you can) and get estimates for the repair costs of your car. Between knowing the value of your car and the required repair costs, this will give you excellent footing from which to negotiate.

Consider an independent adjuster

If you can afford it, consider hiring an independent adjuster to perform a detailed inspection. The adjuster will give you a write-up of the inspection that you can present to your insurer in an appeal.

From this research, have a set dollar value you want and be prepared to justify it during negotiations with your insurer’s adjuster. Also, have a limit for the lowest payout you will accept if they counteroffer.

Consider local laws

Keep in mind the overall payout amount your auto insurance company can offer based on your state’s laws regarding at-fault accidents. For example, North Carolina requires a driver to be completely not at-fault in the accident in order to be eligible for a payout. California state law pays out based on how at fault you were. The less you were at fault, the higher your payout.

File a complaint

If your negotiations are unsuccessful and you still feel wronged, with a complaint with your state’s department of insurance. They may be able to act as an advocate for your claim.

Arbitration

As a final option, you can seek arbitration. The arbiter will come in as an unbiased third party and make a decision on the claim payout amount. Their decision may be binding and final, or it may be non-binding.

Hire a lawyer

In the latter case, you can still pursue litigation if the arbiter’s decision isn’t to your liking. If you choose arbitration, you’ll want to lawyer up. Before taking this step, you’ll want to make sure it’s absolutely worth it. The legal fees that occur can easily be more than what you get paid out if you do win.

If you want to keep your totaled car

If you absolutely want to keep your totaled car, your insurer may give you the option to “elect to retain salvage” if your state laws and your auto insurance policy allow for it.

Under elect to retain salvage law, your auto insurance company will pay the actual cash value of your car minus your deductible and the vehicle’s salvage value. You will still have to pay for repairs in order to get a rebuilt title, which may not be worth it. You could be left with a major wreck and a payout nowhere near enough to cover repair costs.

Furthermore, auto insurers will not insure the car unless it passes a DMV inspection to see if it’s roadworthy. Even after that, there is no guarantee that you can get auto insurance for a car with a salvage or rebuilt title. Auto insurers still may consider a rebuilt car a high risk and just as soon not insure it.

If you decide to pursue this route, your insurance company’s adjuster may counter your objections against totaling the car on the grounds of “betterment”. If your car is older, it may require newer, more expensive parts in order to repair it to road worthiness. This may result in your car being worth more after it’s fixed than before the crash. The chance of your auto insurer paying out more than the car is actually worth is practically zero, so that could derail attempts to keep the car.

Can I buy my car back in a salvage auction?

You may go through the payout process with the idea of buying your car back at auction after the claim is completed. The chances of success, however, are slim. First off, someone might beat you to it and outbid you. Also, some states don’t allow you to attend the auction your car is being sold at without a license restricted to auto salvagers or dealers.

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