In some automobile accidents, a car may be declared a "total loss". Generally, a total loss means the cost to repair the vehicle exceeds 80% of the value of the vehicle. Most people think that the "value" of the car is the cost to replace it. That is not the case. In fact, in most instances, the total loss payment from the insurance company will not be enough to purchase an equivalent car.
Your Insurance Company Will Not Pay More Than Your Policy Limit
If your car is a total loss from an accident, the insurance company will pay you the actual cash value of your car, but no more than the policy limit. The insurance company calculates the payout on the wholesale price a dealer would pay for your car. This is their general definition of "fair market value". If you go through your own insurance company, it pays this amount, less your deductible. Since few of us are privy to wholesale prices, this usually amounts to a payment far below the cost to replace the car or pay off the loan. One way to protect yourself is to purchase "gap" insurance that will pay off the loan on your vehicle if the amount paid by the insurance company will not cover the amount owed on the loan. Gap insurance has certain restrictions so carefully read the policy before you purchase it.
Now, California law is a bit different than the way insurance companies want to adjust the claim. The law states: "To recover damages for the loss, you must prove the fair market value of the car just before the harm occurred.
‘Fair market value’ is the highest price that a willing buyer would have paid to a willing seller, assuming:
1. That there is no pressure on either one to buy or sell.
2. That the buyer and seller are fully informed of the condition and quality of the car.
Don't Accept the Initial Offer from the Insurance Company
When settling a claim for the total loss of your car, remember, the insurance company wants to pay the least amount possible. You want the true "fair market value" for your car. Do your research and get prices on replacement cars. Do not accept the initial offer. Ask to see the background work that was used to make the offer. Only settle when you are satisfied.
Contact Our Attorneys for Help With Your Claim
The Inland Empire Law Group has offices if Ranco Cucamonga and Victorville, and proudly represents accident victims throughout the High Desert region and all of Southern California. If you feel like you're not receiving fair treatment from the insurance company after your accident, we can help. If you were injured, complete the form on this page for help with your injury claim and also get advice to help with the property damage claim.