How to Convince an Insurance Company to Total your Car

It’s a matter of simple economics. The insurance company wants to pay out as little as possible when it comes to claim expenditures. This is part and parcel of their business model which isn’t difficult to understand. As with all corporations, turning a profit is typically the most important goal.

In automobile claims, when a vehicle is damaged, it will be deemed repairable or, if repair costs approach or exceed the vehicle’s value, it will be declared a total loss. Does the vehicle owner have a say in whether their car gets repaired or totaled? In first-party claims, where the accident was your fault, the answer is no. However, in third-party claims, where the at-fault party’s insurance company is picking up the tab, in certain situations, the answer is yes. All it takes is a little convincing.

Most folks have never heard of a third-party Auto Diminished Value claim. These are filed by car owners to recoup the value lost because their cars now have repair histories. Depending on the extent of the damages, the value lost can exceed 50% of the car’s pre-accident value. Even most of those who are familiar with Auto Diminished Value don’t realize that it isn’t necessary to have your car repaired to file such a claim. And many of our clients are doing just that. Prior to authorizing repairs, car owners can demonstrate how totaling their cars makes financial sense for both parties.

For this example, let’s consider a car with a Retail Value of $35K and a Fair Market Value (Trade-in Value) of $30K. Insurance companies typically consider totaling cars if the repair cost approaches 75% of the retail value. In this case, that figure is around $25K. But what if the car’s damage estimate comes to only $15K? Most of us don’t want to drive a car that had extensive damage, especially if structural damage or air bag deployment occurred. No matter – at these figures, the insurer will almost always elect to pay to have the car repaired.

So, how does the owner of this car convince the insurance company to total the car? Along with various other potential expenditures for the insurance company, Third-Party Auto Diminished Value claims represent another major disbursement. When repair costs are this high, the likelihood of structural damage and/or air bag deployment is almost certain.

Scenario #1 assumes a 30-day repair time and that the supplement won’t exceed the amount shown. Every insurance company has endured the nightmare repair where a car must go in for multiple supplements. Also, if the car is a luxury car, high-end SUV or pickup truck, renting a comparable vehicle will cost $125/Day and up. Add another few thousand dollars for a Loss of Use claim.

There are many other logical reasons for preferring that your car be totaled besides loss in value after repairs. Safety and quality of work issues aside, if another negligent driver slams into your car, good luck trying to collect for Auto Diminished Value without resorting to legal action. Insurance companies flat-out refuse to pay for DV on cars with previous repair histories.

From the insurance company’s point of view, negotiating repair costs with body shops and haggling over car rental and diminished value issues are time-consuming and costly – not to mention the potential for further litigation. The total loss and salvage recovery process is a snap, by comparison. If the insurers don’t recognize these mutually beneficial arrangements, it’s up to car owners to educate them.

John M (Arizona)- Thank you very much for the diminished value appraisal. I was able to use it along with the insurance company field appraiser’s salvage estimate and repair estimate to agree with them that the right thing to do was to declare the vehicle a total loss. I managed to pick up one of the few remaining new models in the nation last week and am bringing this to closure without having to file a diminished value case in court. Thanks again!