How insurance claims work

[g6civcx]

Disclaimer: This is just an overview of the claim process from my background as an adjuster. You are strongly urged to consult legal counsel.
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Types of coverage

Generally speaking, there are 3 types of insurance coverage:

Liability - pays other people if it's your fault, i.e. if you hit someone, it pays the people you hit.

Comprehensive - pays you when nobody is driving your car, i.e. someone hits your car in the parking lot, steals your radio, etc.

Collision - pays you when it's your fault, i.e. if you hit someone, it pays you for damages to your car even though it's your fault.


There are other types as well, like medical, lost wages, rental, so on and so forth. These three types are the basic types. Most states will require at least liability coverage with some sort of limit.
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Determining payout

Regardless of who's paying whom, they have to determine how much to pay.

Actual cash value
They start by assessing your vehicle's value prior to the incident. It's very hard to do this, though some companies make you do a vehicle assessment prior to starting your policy to make sure there's no pre-existing damage.

They mostly look at year, make, model, and mileage. They'll also try to look at other damages to lower the actual cash value of the car. Then they'll consult several books to get the dollar amount. If you disagree with this amount, you can dispute. There's a lengthy process you need to go through to get a re-appraisal.

Salvage value
They estimate how much they can get if they sold your car as-is. This is the salvage value of the damaged car without repairs.

Repair cost
The cost to repair the car to the way it was prior to the accident.

Total loss

IF Salvage value + Repair cost > Actual Cash Value, THEN it's a total loss.

What this means is your insurance company can do one of the following:

a) Declare the car a total loss, at which time they'll pay you the actual cash value of the car. They'll take possession of your car and sell it for the salvage value to recoup their loss. NOTE: They'll typically offer to sell the car back to you at the salvage value with a branded title. If you decline, it'll go the salvage auction.

b) Repair the car, at which time they'll pay you the repair cost.

Their goal is to reduce payout. They take the estimated repair cost and salvage value into consideration. They will do a) or b), depending upon which costs them the least amount of money based upon the equation.
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It's also possible that some states require that if the repair cost exceeds a certain percentage of the actual cash value, the company is required to declare a total loss. In my state, it's 80%. This means that if your car is damaged beyond 80%, it's totaled. Your state may vary.

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Again, please consult your attorney because insurance disputes are very lengthy and very involved.

[gtstwincam]

Im a claims supervisor for Farmers Insurance.

Which insurance carrier do you work for?

Nice to find a fellow adjuster here.

[michael1284]

so if i wanted to call and see if i could get their payout price a bit higher...do i have to show lots of proof of higher market value?

[g6civcx]

Originally Posted by gtstwincam

Im a claims supervisor for Farmers Insurance.

Nice to find a fellow adjuster here.

Likewise.

Originally Posted by gtstwincam

Which insurance carrier do you work for?

I no longer work there, but I would rather have my former empoyer remain anonymous, for obvious reasons

Originally Posted by michael1284

so if i wanted to call and see if i could get their payout price a bit higher...do i have to show lots of proof of higher market value?

Again, I'm not in a position to give you legal advice, but generally speaking, most carriers will not give you money for aftermarket equipment. If you disagree with their book assessment, you can always file a request with them for a re-appraisal.

But all your mods are not covered unless you specifically have aftermarket coverage in your policy.

What you could do is get together with your attorney and sue the responsible party for whatever additional amount you want. Bring as much documentation as possible to show that your car is worth more than book value.

I would defer to your attorney for that.

[ManoNegra]

^Interesting.
When my I got the estimate for my wrecked S14 with AAA they gave me local market value. I asked my claim handler if the upgrades I had done would raise it's value and he asked me to show him receipts, that they would help. This was about 1 year ago.

[g6civcx]

Originally Posted by ManoNegra

^Interesting.
When my I got the estimate for my wrecked S14 with AAA they gave me local market value. I asked my claim handler if the upgrades I had done would raise it's value and he asked me to show him receipts, that they would help. This was about 1 year ago.

Did he end up bumping up your actual cash value? The adjuster does have some discretion when determining the car's value. It's just very rare for them to cover aftermarket accessories.

Remember, bumping up the cash value of the car also makes it harder to total the car, versus letting them total the car and buying it back for parts. It comes down to what makes more financial sense for you.

Like for mine, a minor fender bender will make it a total loss since it's worth about $1,000 on paper. If that happens, I'll just let them total it and buy it back for parts.