How does an insurance adjuster determine car value?

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Joel Ohman
Founder, CFP®

UPDATED: May 7, 2018

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Here's what you need to know...

  • If you’re involved in an accident, make sure that you inform your insurance company
  • A claim adjuster will evaluate the damage to your vehicle and give you an estimate of how much the repairs will cost
  • True Market Value is determined by reviewing the actual sales that are reported in the area

In the unfortunate event that you or someone in your family is involved in an accident, you will be put in a situation where you must deal with a claims adjuster.

When a damage claim is filed, the insurance company will assign an insurance adjuster to the claim to assess the condition of the car and to price the cost of damages.

Once an estimator submits an estimate for the cost of repairs, it is the adjuster’s job to do their homework and evaluate the car to compare its current value to the cost of repairs so that a settlement decision can be made.

Since the data will help the company decide if the car is a total loss or repairable, it is crucial that valuations are accurate. Read on, and learn what is considered during the evaluation step and your rights as an insurance consumer.

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Factors that Insurance Adjusters Will Consider When Valuing a Damaged Car

Factors written on a chalkboard

There is not a science to calculating the value of damaged property. It can be a very complicated process because some cars retain their value better than others, some cars have rare trims and additions, some cars are in great condition at the time of the loss, and vehicle list prices can vary by region.

Since there are so many different factors that are weighed while determining a value, there is a good chance that you will have negotiating power when you can show the company where their calculations were wrong.

If you understand just what the adjuster is going to look at, you can better equip yourself to having negotiating power later on when you are discussing a settlement.

If the damage to your vehicle is severe and there is a chance your car could be totaled, a difference in value as small as $200 could matter.

Here are the factors and the tools that an adjuster will use as they calculate and construct a settlement offer:

Sales Prices for Similar Cars in the Region

Insurance companies are not going to issue a payment for the original value of a car unless you have a special new car rider that requires the company to do so.

Your contract specifically says that your policy will only issue a payment for up to the fair market value of the car.

The fair market value, which is also known as the True Market Value, is determined by reviewing the actual sales that are reported for in the area and then adjusting this figure to include vehicle-specific information that can affect value.

If there are not similar cars in the area, the company may look for sales in the entire state.

This method is not useful when valuing a classic car or an exotic vehicle. This is why these cars require a special type of insurance.

— Condition of the Vehicle Before the Loss

If your vehicle was in poor condition before the accident happened, the value will be lower than you might expect. Some companies will actually take photos of a car when they are covering it for property damage.

If not photos are available, an estimator may inspect the car to see if there are signs of old damage that will diminish its value. If you have repaired damage in the past, this may be taken into consideration for the current claim.

They will definitely review your vehicle records to look for signs that you had damage that you did not report.

 Mileage at the Time of the Loss

The more a vehicle is driven, the more the components will wear. Even a car that appears to be in excellent condition can hold a low market value strictly because of its mileage.

The company will most certainly review your mileage and take that into account while they are tallying the numbers.

Cost of Repairs

The purpose of insurance is to restore you to the position that you were in before your loss. If it is possible to repair the vehicle and the repairs are economical, the company will arrange this rather than classifying the car as a write-off.

If the cost of repairs is close to the value or exceeds it, your car will become a salvage. It is critical that you do your own research on the car valuation to verify you are getting what you deserve.

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How to Negotiate Your Car’s Value

An insurance adjuster is never going to point out that offers are negotiable, but there are. If you are not happy with the amount that you are being offered the first time, you have the right to decline the offer in an effort to negotiate.

You cannot just state what you want to receive and expect to get it, but most adjusters have some degree of flexibility.

Here are some negotiation tips to ensure that you are heard when you do not agree:

  • Challenge the evaluation report and ask for vehicles that are not similar to yours to be removed.
  • Ask for the adjuster to average only the top 5 competitors instead of a large number
  • Show invoices and receipts for maintenance or after-market additions
  • Hire an independent appraiser
  • Ask for a new repair estimate
  • Hire an attorney if you cannot come to an agreement

If you are going to push at a better settlement offer, there is no doubt an adjuster is going to push back. You should be prepared for this because many adjusters will receive a bonus for settling claims for a low dollar amount.

Before you accept the value that you are offered, do your homework. If you are not happy with the way that your insurer handled your claim, start to shop around.

After doing this, research customer claims satisfaction rates and then you can connect with the right car insurance company.

Start comparing car insurance rates now by entering your zip code in our FREE tool below!

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