A Total (Loss Claim) History Lesson

Today, we’re continuing the TSD writers series with car insurance insider, Jeff Rieger. Be sure to read Jeff’s articles on classic car insurance, DIY car maintenance, or car insurance after a DUI.

Feel free to share your experiences in the comments, or reach out to the writers via their contact info.

-Trent
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Every driver faces two risks when they get behind the wheel of a car: First, the risk of an accident; second, the risk that the accident will result in a difficult or costly claim. Even if you’ve bought every available insurance coverage, you can still lose time, money, and sleep if the claim turns sour. When it comes to money, the riskiest of these scenarios is the total loss claim.

In February, 2011, I bought a used sports car: a 1998 BMW M3 sedan with a 5-speed manual transmission. I’ll spare you the long story, but it had a salvage title from a prior total loss accident, and I subsequently repaired all its damage and gave it a full paint job with the help of my body shop coworkers. The whole job was done with original parts installed and finished by professionals. It was in excellent condition, and I was sure it was worth around $7,000, whereas it would have been worth about $9,000 if it didn’t have an accident history or a salvage title.

Needless to say, my insurer didn’t agree. In March of 2012, I woke to find that someone had backed into the front of my car and driven off, leaving about $3,500 in damage. My insurer took a look at the car, its high mileage, and its title history, and decided to call it a total loss a second time. Keep in mind, “totaling” a car isn’t a one-time deal, it can be done again and again. It’s just a matter of weighing the cost of repairs against the car’s value.

My insurer thought the car was worth about $3,800. They based their value off of a piece of software that told them some numbers to use, a few hypothetical questions posed to used dealers, and a few “comparable” vehicles (which weren’t comparable at all) listed at nearby dealers. Essentially, they followed common industry practices to develop their assessment of my car’s value – and their assessment came out wrong.

If my car fit in the Kelly Blue Book (KBB) mold of a commonplace car among thousands on the road, with nothing to distinguish it from the rest, establishing a value for my car would have been simple. Unfortunately, my car had a specific history, with an appeal to a specific market of BMW enthusiasts who look past a car’s title history and know when a car is in great shape or not, regardless of its history.

But the facts were the facts, and unfortunately my claims adjuster was either unwilling or lacked the authority to look past their one-size-fits-all method for assessing car values. They even hired an “independent” adjuster who used the same methodology to determine a flawed value.

Since the accident, I’ve had the car repaired and subsequently sold it. Now, a year after the accident and with a bill of sale for $5,000 in hand, I’ve let my insurer know what the car was really worth. Consider it a year younger with one less accident on its history and 10,000 fewer miles, and it would have been worth $6,000 to $7,000. Sadly, though, my insurer is sticking to their guns and has invited me to file a lawsuit against them in small claims court.

Enough with the details, here’s what I’ve learned through this whole process:

Tips for Drivers to Come Out Ahead (Or At Least Not Behind) In A Total Loss Claim
While this provides some general tips and suggestions, this article doesn’t go into detail on the nuts and bolts of handling a claim. For a more detailed primer on navigating an insurance claim, refer to TSD’s car insurance guide.

  • Plan in advance. If you’ve performed any custom modifications, restorations, upgrades, or added accessories to your car, you need to be sure the value you’ve added to your car will be factored into any total loss scenario. If not, your insurer may only pay for replacement of a “stock” version of your car.
    • Check your policy for “accessory coverage” to see how much money will be paid out for aftermarket accessories like stereos, wheels, engine modifications, and other items. Some policies limit your reimbursement to $500 or $1,000, which will barely cover a couple custom rims. Ask your insurer to explain how you can add coverage for more accessories or modifications beyond the vehicle’s “stock” market value.
    • Buy an agreed value policy to have your insurer pay out a predetermined amount in the event your car is totaled. While this may increase your premium above your normal rates, the increase may be worth it for both peace of mind and to be sure you won’t lose thousands of dollars in the event of a claim turning sour.
    • Get an appraisal from an expert before you get in an accident. Such solid evidence will be invaluable when establishing your car’s value; remember, an appraiser may have a hard time establishing its value if the car is wrapped around a tree.
    • Take photos and keep receipts. Document any work you’ve had performed, including major maintenance items, and take photos to show the car’s condition.
  • Stay one step ahead. If your car was involved in a serious accident, don’t wait for your insurer to tell you it’s a total loss. There are a few steps you can take to stay ahead of the curve after an accident.
    • If your car is OK to drive, bring it to a local body shop for an estimate. If it must be towed, have it towed to a shop you can trust or one with a reputation for consumer advocacy. Because the body shop will be serving as a liaison between you and your insurer for certain aspects of the claim, you want to make sure the shop is on your side. Most often, the insurer will pay for the cost to tow it to a shop for diagnosing the damage, and you’ll get reimbursed if you pay for the tow truck up front. Here are some tips for choosing a good body shop.
    • Ask your shop for their honest opinion on whether or not it will be totaled. If you’re unsure, compare their estimate amount to your car’s value. If the estimate is more than half of the car’s value, your car is probably a total loss. If you need to figure out what your car is worth, check local and online classified ad listings, Kelly Blue Book, or NADA to find comparable vehicles to establish its value.
  • Get it detailed. Pretend that you’re cleaning your car up for sale, because that’s essentially how it works. Your insurer will be inspecting it to determine it’s value, and the better its condition, the better the value (damage aside, of course). After the accident, even if the car is partially destroyed, have it washed and vacuumed. Many body shops will do this at no charge, and even something this simple can add a few hundred dollars to your car’s value in the appraisal.
  • Get to know your adjuster, and be their friend. Your adjuster is the person who calls the shots on your claim and issues the checks you’ll receive as reimbursement for your car. While adjusters are supposed to impartially analyze a claim based purely on the facts, being on their good side can mean the difference between certain aspects of your car being assessed in “fair” or “poor” condition, and such a distinction can mean a few hundred dollars or more.
    • What’s more, many adjusters are encouraged to pay out “more than fair” values for customer’s cars if they think the customer will use the money to go buy a nicer, newer vehicle and continue their insurance policy with complete coverage (and high premiums for years to come). Being a friendly customer will help your adjuster justify a higher payout for your old beater, in the hopes that you’ll buy something nice and thus pay to have it fully insured.
  • Know when to fight, know when to walk away.
    • If your insurer is covering the loss and you disagree with their assessment, you may be able to resolve it cheaply through mediation or arbitration. These are options for dispute resolution that are built into most insurance policies, and typically cost less than $500 to do.
    • If you are going through another driver’s insurance, your only option for dispute resolution would be to file a lawsuit against the at-fault driver. Most states have easily-accessible options for litigating small claims without the requirement (and high cost) of an attorney. But before filing suit in small claims court, a letter to both the other insurer and the at-fault driver will often go a long way towards motivating the insurer to resolve your dispute without dragging their customer to court.
    • Depending on the amount in dispute, neither of these may sound appealing, particularly if you’re only arguing over a couple hundred dollars. If that’s the case, make a couple of appeals to your adjuster, but don’t waste your time arguing over something you can’t pursue without losing money.

Most importantly, keep your mind on the future and treat this process as an opportunity to reassess your automobile needs in order to make a better choice for your next vehicle. So long as you prepare in advance, avoid getting caught off guard, and take a few key steps on the back-end of your claim, you can be sure to navigate a total loss claim with ease and get top dollar for your car. And that, my friends, is valuable.

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