How is "Fair Market Value" Determined After a Car is Declared a Total Loss?

It is essential to understand how fair market value is determined following a car crash. Often, what may seem to be a minor fender bender at first glance can result in the car being declared a total loss. This usually occurs when vehicle property damage and the cost to repair the damage exceeds 80% of the vehicle's value. When a car is declared a total loss, the insurance company is obligated to pay you fair market value. However, many people don't understand how the insurance provider arrives at the figure they offer. Moreover, many people don't realize they can negotiate this offer and are not obligated to accept it.

When a car is "totaled" the insurance provider will pay a policyholder the wholesale value of the vehicle before the crash. This estimate is almost always less than the market value of the vehicle. It represents the price a dealer would pay for your car at an auction or a trade-in. Factors that influence the wholesale value include the car's condition prior to the crash, the vehicle's age, mileage, make, and model.

The vehicle's value is not affected by the vehicle property damage it suffered in a motor vehicle accident. However, in most cases, the settlement offered is almost always less than the cost of replacing the vehicle or paying off any loans against it. In such instances, a gap insurance policy may cover the difference.

Insurance policyholders are under no obligation to accept a settlement offer from their insurance provider. In fact, most expect clients to negotiate the offer. Moreover, in Texas, insurance policyholders have the right to request the insurance company's calculations used to determine the vehicle's value. Policyholders can review this information and counter with their research that shows the vehicle was worth significantly more than the insurance provider is offering.

Finally, policyholders should know that it is against the law in Texas for insurance companies to withhold payment for personal injury claims pending the policyholder's acceptance of settlement for vehicle property damage.

When you have questions about vehicle property damage, contact the team at Welmaker Injury Law in San Antonio at (210) 828-6033. We will answer your questions and help you determine the best way to move forward with your motor vehicle accident claim.