I recently helped a client of mine settle the total loss of her car that had been stolen, and the thought crossed my mind that others might find the information useful. My background before becoming an independent agent in 1996 was as a claims adjuster for a national insurance company. I learned a lot from working in that capacity, and found that most people who were unfortunate enough to have an automobile total loss situation did not know how the process worked, and would blindly set for whatever figure was presented to them.
Insurance companies often utilize outside vendors to provide a detailed report listing comparable vehicles in the area and their respective asking price. Most of the time these reports are accurate, but sometimes they are not. It is important as an insurance consumer to educate yourself when dealing with the insurance company to settle your total loss. Once you do your due diligence and arm yourself with knowledge, you will be in a much stronger position when the company presents you with their settlement offer.
I am often asked how insurance companies determine the value of a vehicle that has been deemed a total loss. Do they use Kelley Blue Book or Edmund's guide? The answer is no. California law prohibits insurance companies from using such guides to determine a vehicle's value, as these guides are national in scope, and the value of your vehicle may be higher or lower than their figures based on the market in your area. Insurance companies have to determine the market value or actual cash value of the vehicle in your specific area. They can do this by searching local advertisements to find comparable vehicles for sale. These can take the form of print ads in the newspaper or online ad sites. The insurance adjuster may also talk to local dealerships to get a quote for comparable vehicles.
Usually the insurance company will come up with 7-12 comparable vehicles, and will list them all and average their prices to arrive at what they estimate to be the actual cash value of your vehicle. They will typically present you with the total loss settlement offer, and hope that you just accept it sign the release. This is where your research comes in handy. When you first suspect that your vehicle may be a total loss, you should start your research. Look on local websites such as that have used cars for sale in your area. Try to find as close a match to your vehicle as you can (ie same year / make / model, same or similar options packages, mileage, and condition). Of course you will be trying to find the comparable vehicles with the highest asking price. Try to find 5-10 comparable vehicles that are on the higher end of the price spectrum. Add all the prices up, and divide by the number of comparable vehicles in your sample to get an average.
When the insurance company presents you with their settlement offer, you now have a good idea of whether their offer is fair or is too low. The settlement process is not about haggling back and forth like you would with a used car salesman though. The claims adjuster wants to settle the claim as much as you do so that they can get the file off their desk and move on the next one, but they need documentation to put in their file to show how they arrived at the final settlement figure. You can help them by letting them know that you have done your research, and feel that their offer is low. Ask to see their report or research to see how they arrived at the figure they are offering. They are obliged to provide that information if you ask. Then, provide them with your research, and request they add the comparable vehicles that you found to their list, and average them all out. This should increase the overall figure.
Sometimes, as was the case when the insurance company settled the total loss of my wife's vehicle, the offer is very fair. I had done my research, and determined the actual cash value of the vehicle. When the insurance company called and offered to settle the total loss for significantly more than the figure I had come up with, of course I did not argue with them.
By doing your due diligence and arming yourself with information, you will be in a better position to determine if the insurance company's offer is accurate. If their offer is low, you now have the ammunition to bolster your position and maximize your total loss settlement.