Let’s say you were in a car crash and your car was totaled. How do you know if you’re getting fair value for your car?

After a car crash, an insurance company will appraise the damage to see whether it’s cheaper to fix your car or total it out. Usually if the cost of repair is more than 60-70% of the value of your car, it will be considered a total loss, in which case the insurance company will opt to pay you the fair market value of your car rather than pay to have it fixed. So how do know the fair market value of your car?

First, fair market value is not affected by how much you may owe on your car. For example, let’s say your car is worth $20,000 today, but you bought it 6 months ago for $25,000, and you still owe $22,000 to the bank. Maybe you still owe $22,000 because you overpaid for your car. Or maybe your car’s value went down for some reason. That is unfortunate, but does not affect what the insurance company is obligated to pay you. In this case, since the fair market value of your car is $20,000, that is all you will get, even though that leaves you owing $2,000 to the bank. This is why people buy something called GAP insurance which covers that difference when this situation arises.

So, how is fair market value determined? It is simply the amount that cars similar to yours are selling for in the local market. Along with a total loss offer, you should receive paperwork called an ACV showing how the insurance company determined the value of your car. You can then check to see if the cars used for comparison are similar to yours in mileage and options, and even call the dealers listed on the ACV to verify the prices they show on the ACV.

Every car damage case is unique, and what I just said may not apply to you. Therefore, before taking any legal action, you should call a lawyer who can advise you on the legal options in your particular situation.