How Do Insurance Companies Determine The Value of a Totaled Car?

Posted on Sep 12, 2016


When you are in an accident that does sufficient damage to your car, the insurance company considers the car a total loss. That does not necessarily mean you get the full retail value of your vehicle from the insurance company. Instead, you receive an amount, determined by the insurance company. What gets confusing for many people is that insurance companies may not use the same guidelines to determine the value of your vehicle as someone purchasing it in pre-accident condition.

The criteria listed below are just a few factors used by insurance companies to determine the value of your totaled car.

Vehicle Mileage

Just as mileage weighs heavily in determining the blue book value of used cars being sold to the public (or traded in for newer cars), it can also be used to help determine the appropriate value of one that has been totaled in an accident. The fewer miles your vehicle has, the higher the value that is assigned to your car based on the mileage.

Condition of Vehicle Prior to Accident

The truth is that if this is not your first accident or your vehicle is not in near mint condition, it will be determined to have less value than those that have flawless finishes unmarred by shopping cart dings, signs of rust, or too much time spent in the summer sun. These cosmetic injuries can add up to a big hurt for your wallet if your car is totaled. It is always best to have repairs made right away so that your car looks as good as new at all times.

Vehicle Option Packages

These are factory options that are included in the vehicle when you make the purchase. Different brands offer luxury touches, upgrades, and packages to make your car more comfortable, luxurious, appealing, or even kid-friendly. You may even have a few safety upgrades on your vehicle that will add to the total value of the vehicle and increase the insurance company’s determination of value for your car.


Unfortunately simply driving a new vehicle off the lot for the first time will cost you approximately 20 percent of the sales price in depreciation. Fewer things lose value faster or more dramatically than cars. The older your car is, the less worth it has in the eyes of insurance companies.

If you own a classic vehicle or one that is considered a hot rod that isn’t used for everyday use, you may be able to obtain a policy for classic cars that involves an ‘agreed upon’ value in the case of totaled cars.

Type of Insurance Coverage

When it comes to cars your insurance company may allow you to choose from an actual cash value policy or a replacement cost policy. The actual cash value policy is considerably cheaper. However, when you are in an accident in which your vehicle is determined to be a total loss, this policy subtracts depreciation, wear and tear, and other incidentals from the amount they are willing to offer. If you have a replacement value policy, it will pay the amount of money it would cost you to purchase another vehicle in a condition similar to yours (prior to the accident). In many cases this will be sufficient to pay off the remaining debt on your vehicle but you pay much more up front for this type of insurance protection.

If you still have questions about determining the value of totaled vehicles, make sure to call Otterstedt Insurance Agency at 201-227-1800 for all your auto insurance needs. We can help you find the right policy, for the right price.

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