How does Your Insurance Value Your Car After a Total Loss?

You’ve been in an accident. Your vehicle has been towed to the body shop and your repairman tells you he thinks it will be a write off.

If you have New Car Replacement, Better Car Replacement, or Limited Depreciation Insurance, this isn’t exactly bad news. If you only carry collision insurance, the news is not quite as good, you may be getting a lot less for your vehicle than what you originally paid for it.

How is a total loss determined?

Your primary insurance adjuster will request an estimate for repairs from the repair facility in possession of your vehicle. Based on the estimate, they will determine if it would cost less to repair your vehicle or pay you a total loss settlement. This often involves estimating the amount they would receive for your un-repaired vehicle when sold at auction for salvage, and determining the current market value (or depreciated value) of your vehicle.

How is the current market value of your vehicle determined?

Assessing your vehicle

Your primary insurance adjuster will first assess your vehicle to determine:

• The make, model and year of your vehicle
• The kilometres on your vehicle
• The options included in your vehicle
• The condition of your vehicle including tires, rims, paint and interior
• If any aftermarket equipment was installed on your vehicle
• If your vehicle has any damage unrelated to the accident

Once your adjuster has all the relevant information, they can then start the valuation process. They will use one of three different methods for valuing your vehicle:

• A valuation service such as Audatex
• An average asking price of comparable vehicles for sale online
• Applying a percentage of depreciation to the Manufacturer’s Suggested Retail Price of your vehicle

Valuation Services

In our opinion, valuation services are the preferred method of valuing your vehicle. You can request this report from your adjuster and if one is used, a copy of the report is required by DriveSure to settle your claim with us.

A valuation report should include such information as:

• The year, make, model and VIN# of your vehicle
• A list of options and packages available for your vehicle and an indication of those that were included on your vehicle
• The original Manufacturers Suggested Retail Price of your vehicle based on the options included
• A list of comparable vehicles for sale within your general vicinity
• Condition adjustments such as kilometers, paint, tires and interior
• Previous damage adjustments
• Adjustments for aftermarket equipment
• Other adjustments such as typical negotiation,
• The current market value of your vehicle as determined by the valuation service

Included Options

Pay close attention to the trim, options and packages indicated as included on your vehicle and take note of any mistakes, this could affect the final amount of your total loss settlement. You will want to inform your adjuster of any mistakes or omissions immediately so they can update their valuation. Most valuations we review leave out options and packages or have lower trim levels selected.

Comparable Vehicles

A list of comparable vehicles and their included options is used to determine the average selling price of similar vehicles in your vicinity. This list can be three to even twenty or more vehicles, depending on how old your vehicle is and how many similar vehicles are for sale. The older your vehicle, the easier it will be to find comparable vehicles for sale. Make sure that the lower value vehicles are not entirely dissimilar from your vehicle as these values will contribute to the average selling price, which the valuation service will use to determine the current market value of your vehicle.

Adjustments

Once the current market value of your vehicle is determined by averaging the selling price of comparable vehicles in your area, adjustments are taken into consideration:

If your vehicle has more than the typical amount of kilometers for its model year, a negative adjustment will be made based on how far over typical your vehicle is. Similarly, if your vehicle has less kilometers, value will be added to your vehicle.
Condition adjustments are made based on the condition of your tires, paint, and interior. These adjustments are never positive and will only decrease the value of your vehicle.
An adjustment for previous damage may be made if your vehicle has damage unrelated to the cause of the total loss. Ensure that this damage was not from cause of the total loss and existed previously.
If you installed aftermarket equipment such as exhaust, rims, spoilers etc., your adjustor will add the depreciated value of these items to your settlement. They may ask for receipts for these items so if you can, make sure to hold on to them. You will want to ensure their calculation of their value matches what you could sell these items for at the time of your total loss claim.
A negative adjustment for typical negotiation will be made to the current market value of your vehicle. This is generally 5% and assumes that the comparable vehicles used to value your vehicle would not sell for the prices listed, but instead would be negotiated lower.
If your vehicle is only a few months old, it may be hard to find comparable vehicles. If only new vehicles are found for sale, your adjuster may deduct a set amount of depreciation such as 10-15% from the new selling price. In this scenario, it is extremely important to ensure that the new vehicle was exactly comparable to your vehicle.

A list of Comparable Vehicles Found for Sale Online

Some primary insurers will have their adjuster browse online car sale sites such as autotrader and craigslist for comparable vehicles. The average selling price of these comparable vehicles is used to determine their total loss settlement to you.

If this method is used by your adjuster, ask to see their list of the comparable vehicles. Look for vehicles that are for sale by private owners, which may be at a discounted price and unavailable to you if you are financing your vehicle. Also, ensure that no comparable vehicles have a status such as Rebuilt or Salvage, as these vehicles are often discounted thousands of dollars and will lower the average selling price substantially.

Applied Percentage of Depreciation

If your vehicle is less than a few months old your primary insurance adjuster may simply deduct an amount for depreciation from the MSRP of your vehicle. This is typically done when no comparable used vehicles can be found and may be done without the use of any valuation services. Ensure the amount of depreciation is fair for your vehicle.

Conclusion

Now that you are an expert on how vehicles are valued after a total loss, you can feel confident speaking with your adjuster and ensuring you receive fair value for your vehicle.

A DriveSure policy protects your vehicle against depreciation after a total loss. Visit our New Car Replacement, Better Car Replacement and Limited Depreciation Insurance pages to estimate the financial gap that our policies protect against using our interactive depreciation graphs.

If you have any questions about your valuation and have a DriveSure policy, our claims agents are here to help, contact us and we will be happy to walk you through your valuation to ensure you are getting a fair total loss settlement from your primary insurer.

DriveSure Insurance Services is a private optional vehicle insurance provider serving British Columbia and Alberta, Canada. Our products are offered through insurance brokers and select dealerships.

Our products include New Car Replacement Cost Insurance, Better Car Replacement Insurance, Limited Depreciation Insurance, Diminished Value, and OEM Parts Coverage. We also include coverage’s such as Deductible Reimbursement and Lost or Stolen Key Fob Replacement in select products.