Negotiating a Car Insurance Payout

Negotiating a car insurance payout can be intimidating, The best way to be prepared is to research factors like the rental car cost and towing fees.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Jun 26, 2020

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Here's what you need to know...

  • If your car is totaled and you are entitled to a payout, you have the right to negotiate the price
  • Insurance companies use a variety methods to determine how much your payout should be
  • Be polite yet firm in your payout negotiations with your insurance company

If you’re ever unfortunate enough to be in a car accident resulting in your vehicle being totaled, your insurance company will write you a check to replace your car with a similar model of equal value. If insurance is not paying enough for a totaled car you can negotiate!

Insurance companies may not be the big, evil corporations they are made out to be, but they are businesses whose main goal is to make money.

Therefore, it’s only natural that they will offer you the lowest payout possible while still keeping you as a happy customer. If it takes a higher payout to keep your business, they’re also willing to do that.

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How a Car Insurance Payout is Calculated

Your insurance company uses a variety of methods to determine the value of your car insurance payout.

They look at the current market value for your model in its condition just prior to the accident, its current mileage, geographic location, and how long you’ve owned the car.

Some insurance companies employ proprietary formulas to help determine what they believe is the proper value for your vehicle and others use industry standards like:

Regardless, their goal is to give you sufficient reimbursement to replace your car without making an unnecessarily high payment.

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Taking an Active Role in Determining Car Insurance Payout

Are car insurance settlements negotiable? Yes! You can help your insurance company arrive at a proper payout value by doing some research on your own.

If your insurance company doesn’t use the previously mentioned resources like the Kelley Blue Book, feel free to use them yourself. Look up the make, model, mileage, and the condition of your vehicle before the accident.

Be honest in your assessment of condition; just as you don’t want to be ripped off by the insurance company, you shouldn’t rip them off either.

In your estimate, include any custom modifications you made to the vehicle. If you added a sunroof, custom stereo system, new wheels, rims, or anything else, those things will add to the value.

Other Things That May be Part of Your Car Insurance Payout

When a car suffers damage that is repairable, your insurance policy will probably only cover repair costs and possibly the price of a rental car.

But when a car is totaled, an insurance policy should cover all of the costs such as:

  • taxes
  • title
  • registration
  • towing fees

Make sure that you include these expenses in your estimate and provide supporting paperwork from your state DMV that includes any fees they will charge you.

The cost of your rental car should also be covered under most insurance policies. However, the car insurance company may dictate what type of car you can rent and for how long.

It’s far better to accept their terms where car rental is concerned, and simply live with it for the short time it takes you to replace your vehicle.

As always, make sure you get documentation and receipts for your rental car since oftentimes the insurance company will pay that bill separately.

How to Negotiate Car Insurance Payouts

How do you negotiate a settlement? In business negotiations, there’s a principal called “good faith.” The idea behind good faith is that both parties go into negotiations with the expectation that the other is being honest and is willing to work on a compromise.

You need to trust your car insurance company and not automatically assume they are trying to take advantage of you.

As long as you have all of your paperwork and receipts, you can negotiate with confidence knowing the true value of your vehicle. Don’t be rude or abusive, but don’t be timid and shy either.

State your case, present your paperwork, and ask for a specific amount. Your insurance adjuster will do the same, and you’ll most likely meet somewhere in the middle.

Reaching a settlement keeps both sides happy and will help you maintain an ongoing relationship with your insurance company.

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