If you look at your auto insurance contract, you’ll notice a provision that if your car is damaged in an accident, your insurer doesn’t have to pay you more than your auto is worth. If it would cost more to fix the car than a certain percentage of the car’s value, your insurer will consider your car a total loss, i.e., “total” it. All you’ll be able to get is a check for the value of the car. This is bad, because it usually won’t be enough to replace your car, and it won’t be enough to fix it. Plus, if you get back your car and use the money to fix it, insurers may refuse to provide more than basic liability coverage on it.
FAQs: Car Insurance
Insurers keep proprietary databases on car prices, similar to the Blue Book or the National Auto Dealers Association (NADA) Official Used Car Guide. The insurer’s valuation of your car is mostly based on its age. So, your car might be totaled if it’s thirteen years old and receives only minor damage, and it might not be if it’s a brand new Porsche that has been in a devastating collision.
If negotiation doesn’t bring any results, you can try to resolve the matter either through arbitration or litigation. But before doing that, it may be worth asking a lawyer if he or she can help get a more favorable settlement informally.
Arbitration, which is less of a hassle and less expensive than going to court, will usually result in a decision favorable to the insurance company. Insurance companies are practiced at arbitration, and arbitrators have to deal with them all the time. Some arbitrators don’t want to get the companies upset. Having an attorney at arbitration will increase your odds. However, the best bet, if you’re going to try arbitration, is to see if nonbinding arbitration is an option. That way, you can still take the matter to court if you are not satisfied.
Going to court is rarely a cost-effective option. Unless the matter (a car) was extremely valuable, and the insurance company’s offer is a tiny fraction of what you believe the vehicle was worth, you may spend more in attorney fees and costs than the amount you might recover.