Dealing With The Insurance Company When Your Car Is A Total Loss

My daughter recently crashed her 2002 GMC Envoy, damaging the left door, front left quarter panel and front bumper. I thought the damage would be repairable (which it is), but the insurance company decided to total the car instead of repairing it. As you can see from the picture, the car does not look totaled. The estimate for the repairs came in at about about $6000.  The truck is worth about $9,500, so why would the insurance company choose to total it instead of repairing the damage? I'll answer that question and give you a few tips if you find yourself working with a claims department on a vehicle they consider a total loss.

Why would they total the car if it's cheaper to repair it? Insurance companies always choose the route that will cost the company the least amount of money. If a car needs repairs reaching 65% or more of the vehicles total value, it is often times less expensive to actually total the car instead of repairing it. The reason for this is the salvage value of the car. Once an insurance company pays you for the loss of your car, they turn around and sell it for it's salvage value, recouping a portion of the amount they paid you. When you subtract the salvage value from the amount paid out, it is often times less expensive than actually repairing the car. For example, if the salvage value on my daughter's Envoy is $3,500, the insurance company's cost is back down to $6,000. Then add in other factors like storage costs of a car before and after repair, rental car costs during repair and the possibility of finding more damage once a car is torn apart and you can see how they can save money by actually totalling a car instead of repairing it.

Tips for dealing with a totaled car: If you do find yourself in the unfortunate situation of a totaled car, there are some things to remember that will help you get the most accurate payout from your insurance company. Chances are you won't like the first offer made to you for your car, so it's your job to help the insurance company give you the right amount. Here's how:

1. You're in this together: Remember that the claims adjuster you're dealing with is human, and wants to be treated as such. Lots of people forget that the claims adjuster is on your side and they really do want to be fair with you. It's not you against the insurance company and the claims adjuster is not looking to cheat you. Kindness and common courtesy can go a long way! Your claims rep is probably dealing with a hundred or so claims in addition to yours. They've got a lot of work to do and they probably have a lot of people yelling at them. It's a stressful job and they really appreciate dealing with clients who show a little patience and understanding.
2. Do your homework: These days, insurance companies don't just look at the book value of your vehicle. In fact, the book value is one of the lesser considerations when determining what your car is worth. Claims adjusters will be shopping online for a car just like yours to see what you could buy it for today. Make yourself a log of every car for sale within 75 miles that matches your vehicle. Check on Ebay, Craig's List, Autotrader, Kelly Blue Book and maybe even the local classifieds. Keep track of which site each car came from, the price and mileage of the car, the model (in case it is different than your's) and any differences that would make your car worth more or less. This may sound like a lot of work, but it should take you no more than an hour, and that hour will probably put some extra money in your pocket! When I was researching 2002 GMC Envoy's to replace my daughter's, I found 11 within a 75 mile radius.
1. Make sure the adjuster is using the right information: Claims reps have a lot of work to do and they may forget to add in features that your vehicle has, or they may pick the wrong model all together. They're not doing it on purpose, but they are working fast and they are not as familiar with your car as you are. Make sure you tell them about any thing they may have overlooked, like a sun roof, 6 disc changer, power seats, etc. My claim adjuster picked the wrong model of Envoy and the original estimate for my payoff was $2000 less than the final amount.
3. Don't forget the extras: If you've recently replaced the tires, gotten a tune up or an oil change or done other service work to the car, make sure your claims rep knows about and takes it into consideration. The same is true of any extras you've added to the car like after market rims or stereo systems (some insurance companies require that you add in the extras to your policy in order for the to be covered. Check with your local agent for the specifics on your policy).
4. It's okay to negotiate: The first offer they bring you may not make sense to you, but there's no reason you have to accept it right away. The claims adjuster will break down the offer and give you a detailed explanation of how they came up with the amount your vehicle is worth. If it doesn't sound right (or fair), let them know you'd like to take a day and research things a little bit. Let them know that you appreciate their work but things sound a little low. You're not required to accept the offer they make you, but keep in mind, if you cannot reach an agreement you will most likely have to go to mediation.
5. You can still keep the car: If you decide that the damage causing your car to be a total loss is just cosmetic and you'd like to keep the car (or even if it's not cosmetic but you'd like to keep the car and repair the damage yourself) the insurance company will allow it. There have been plenty of hail storms here in Colorado lately that leave a car pitted, but otherwise in perfect driving condition. If you don't mind the hail dings, just let the insurance company know you'd like to keep the car. They'll adjust their offer to you by subtracting out the salvage value (the money they would get for selling the car to a salvage yard) and pay you the rest. Keep in mind, the car will not be allowed to have comprehensive and collision coverage because it has already been deemed a total loss, but you can still keep it insured and drive it for as long as you'd like!

It's never fun dealing with an insurance claim, but it doesn't have to be a bad experience either. Remember the positives, hopefully no one was seriously hurt in the accident (the most important thing) and you've got an insurance company working with you to help get you back to where you were before the accident. Yes, there will be some out of pocket expenses, like your deductible, but it's a whole lot better than if you had no insurance at all. Keep a good attitude and you'll be back on the road before you know it.

Robert Edgin