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Negotiating your car’s value after an accident

Fact-checked with HomeInsurance.com

One of the benefits of having auto insurance is that your provider will reimburse you for your vehicle’s repairs after an accident. To determine your payout, the insurance company puts a value on your car, evaluates the cost of repairs, and cuts you a check for the amount it determines is owed. However, insurance companies value cars differently. If you disagree with the payout you’re offered, there are ways to contest it. 

How insurance companies determine your car’s value

First, let’s talk about how insurance companies actually determine your car’s value. After you’ve been in an accident, your vehicle is evaluated by a claims adjuster who assesses the damage and decides the cost of repairs. 

If you caused the accident, your insurance company’s adjuster will be the one to look at the car. Otherwise, it will be evaluated by an adjuster from the at-fault driver’s insurance provider. 

In either case, one aspect generally remains the same—the insurance adjuster wants to offer as only the amount of money they are legally liable to pay you. Insurance companies lose money every time they have to pay for an accident claim, so payouts can sometimes be undervalue for actual repairs.

If you do accept the payout amount without dispute, the next step is to find a mechanic and let the insurance company know where you’re getting the car fixed. They can also provide recommendations if you don’t have one. Instead of you getting the check, the insurer will typically send the payment directly to the mechanic for the agreed upon cost of repairs. 

If you have questions about your car insurance policy, or how your provider estimates the value of your car, an agent can provide more information.

Negotiating with your insurance company

In some cases, your insurance company will offer a payout that you don’t think is fair or reasonable given the price for necessary repairs. That’s why it’s important to know the value of your car and actual cost of repairs so you can determine if the adjuster has offered you a reasonable payout. There are a few different ways you can do that.

Know the value of your car

Ask a mechanic

The best option is to take your car to your personal mechanic. It should be someone you’ve worked with in the past and trust will accurately and fairly assess your vehicle and the extent of repairs necessary. Alternatively, you can take the car to multiple mechanics to get a few different valuations that you can compare.

Do online research

The second option is to find the estimated value of your car online. Sites like Kelley Blue Book and Edmunds keep a catalogue of every car make and model, and the estimated value based on the year. You can also search for your personal car’s value by inputting the VIN or license plate number. Based on the extent of repairs and real value of your car, you can gauge whether or not the insurance quote is reasonable. 

Start negotiation

After you’ve obtained several quotes, you’ll need to start the negotiation process with your insurance company or the claims adjuster. As a policyholder, you have the legal right to decline the initial payout and ask for a better one. You can contest the payout without opening a lawsuit or taking the insurance company to court. In fact, it’s in the best interest of the driver and the insurer to avoid any costly court proceedings so many providers are fairly willing to discuss coming to a mutual agreement.

Before you notify your insurance company that you’re declining the offer, it’s best to have a desired settlement amount in mind, and a minimum offer that you’ll accept. Your target payout should be based on the quotes you received from the mechanics. 

During the negotiation process, the adjuster might say that their initial offer factored in betterment. Betterment is the idea that older cars often require new parts, which ultimately raises the car’s pre-accident value. However, insurance providers usually make drivers pay for the difference in value, or lower their payout to reflect the betterment.

It’s possible but not necessarily easy to contest a betterment argument. Essentially, it means you’re trying to get more money out of your insurance company than what your car is technically worth. If you’re arguing over betterment, you’ll need to justify that new parts won’t raise your car’s value. A mechanic’s repair estimates can serve as proof. 

Keep in mind that depending on the extent of the damages, you might be able to convince your insurance company to declare your car a total loss. This often happens when the repair costs are at least 80% of your vehicle’s value. 

Negotiating a total loss can be beneficial because it’s almost guaranteed that you’ll get a higher payout, which you can use to purchase a new car. But cars depreciate faster than you might think, and you could end up again with a lower payout than what you want.

Diminished value after an accident

The value of your car decreases after any accident, regardless of the severity of the damage, or what needed to be fixed; this is called diminished value. There are three primary ways that a car can lose value following an accident: 

  1. Immediate: Immediate diminished value happens as soon as you get into an accident, and before you make repairs. This type of diminished value is generally rare and temporary because your insurance provider will cover the cost of repairs after an accident.
  2. Inherent: Inherent diminished value occurs when your car loses value because it has an accident history. This is the most common type of diminished volume and it assumes that any accident-related damages were fixed by a licensed mechanic or professional.
  3. Repair-related: Repair-related diminished value is when your car’s repairs weren’t made correctly following an accident. This often happens with DIY solutions — like repainting a car yourself, rather than taking it to an auto body shop. It also means the car can’t be restored to its original condition.

If you get into an accident in which you are not at-fault, you can choose to file a diminished value claim. This type of claim helps you avoid losing money due to diminished value that you didn’t cause.

The takeaway

  • After an accident, your insurance company will determine your car’s value and offer a payout for the damages.
  • If you don’t agree with the initial payout, you can negotiate a higher amount.
  • Before asking for a better payout, have a mechanic evaluate the damages and determine the cost of repairs.
  • Disputing the payout won’t lead to a lawsuit, but it’s important to be prepared and have a target payout in mind.

Getting into an accident is frustrating on its own and can be even more frustrating when your insurance company gives you a lowball payout for the cost of repairs. If you think your car’s value is higher than what the insurance company says, or the proposed cost of repairs isn’t reasonably adequate, you can contest it to pursue a better valuation and payout.

Before you start negotiating, look up your car’s value on Kelley Blue Book or Edmunds, and have the damages appraised by a mechanic. Provide your value estimates to the insurance company and make a case for why you’re entitled a higher payout. If the accident wasn’t your fault, you can also file a diminished value claim to avoid losing more money than what you deserve.

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