Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health insuran...

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager Chris Harrigan

UPDATED: Sep 27, 2020

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Key takeaways...

  • There are a variety of factors that play into the final settlement amount
  • Insurance companies must be able to explain how they arrived at the final number
  • You can seek resolution through government agencies or the courts

Being involved in a car accident is stressful, and you’re bound to have questions and concerns in the aftermath.

In addition to any payments for medical bills and rehabilitation, you may also be waiting for compensation for property damages.

Knowing how insurance companies determine these payments can help you determine if your offer is fair or not.

If you are also looking for better auto insurance rates, start comparison shopping today by entering your ZIP code above!

Several Factors Play a Role


There’s no set formula used to determine settlement levels, which can be stressful for you because you will wind up having to wait and see what’s offered.

But it’s because the companies need to look at the big picture and a range of different factors.

Your final settlement will depend on the following factors:

Presence and Types of Injuries

The insurance company will look at the total medical bills to date, any lost wages, and what the injuries are likely to cost in the coming years.

A simple broken arm that is fine in a few months will not carry as much of a settlement as a serious injury that results in a lasting physical handicap.

You may also be able to seek compensation for your pain and suffering, including the distress caused by scars or any permanent disfigurement resulting from the accidents. Chronic pain that may linger for an extended period can also justify seeking a larger settlement.

Any Property Damage

If the car can be repaired, then you’ll receive compensation the reasonable cost of repairs.

However, your car also may be declared a total loss if it’s going to cost too much to repair it. In this case, you’ll receive the actual cash value of your car as determined by the insurance company.

The Limits on the Applicable Insurance Plan

If your accident is caused by someone with only $10,000 in property damage coverage, then the plan will only pay up to that amount. Even if your brand new car worth $40,000 is totaled, the company will still only pay up to the limits of the policy.

You would have to sue the other party in order to receive the difference.

Another option would be to file a claim with your own insurance company. With uninsured and underinsured motorist coverage, your own insurance company would pick up the difference up to the limits that are defined in your plan.

If you feel that your company is offering a low price, then you may want to consider switching providers. Companies are rated in part based on how well they handle claims, so you can look at a company’s score before making the switch.

With help from comparison sites, you can look at different premiums and choose the company that’s right for you.

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Fine Print of Total Losses

Insurance companies are trying to minimize their own losses, so they won’t typically pay more to fix a car than what the vehicle is worth.

When they total a car, the payout is based on the depreciated value, which is typically less than the replacement cost. In order to determine an accurate basis, the company will usually look at:

  • Price paid for the car plus any improvements
  • Prior damage not related to the accident that could still impact value
  • Purchase price of similar car from the same model year

You will have to continue paying insurance for your totaled car until you turn the license plates over to the Department of Motor Vehicles in most states. The insurance company will expect to take possession of the car so that they can sell it off for scrap or take other steps with it.

However, you may be able to buy the car back from your insurance company so that you can use the claim proceeds to go towards repairs. You would negotiate the price directly with your provider.

Dispute the Claim


In most states, consumers have the right to dispute a claim that they believe is too low.

Insurance companies in all states are held to certain standards, and you can check to be sure that they’re following the letter of the law.

In general, states impose the following regulations on insurance companies:

  • Companies cannot misrepresent policies by providing policyholders with incorrect or misleading information
  • Agencies are prevented from withholding payment on a claim in order to force you to accept a lower settlement on another part
  • Claims should be acknowledged in a timely manner as determined by each state
  • They cannot delay the process by asking you to fill out unnecessary forms
  • Companies in most states are also prevented from using the appeals process to keep claims tied up in court indefinitely
  • They must be able to explain why a claim has been denied or settled based on a lower amount

If you believe that your insurance company is not acting in an appropriate manner, then you can take steps to remedy the situation. One is to have your insurance agent or broker help you with the process.

You can also write a letter to the company stating the problem and outlining the solution that you’d like to see.

If necessary, you can also get a third party involved by filing a complaint with the state or even take legal action through the courts.

File a Complaint


If you feel that your provider is not fair or reasonable, then you can move forward with a complaint. Most states have systems in place for filing a formal complaint with a government agency.

Be sure that you have all the information ready to go by:

  • Documenting phone calls with the insurance company or your agent
  • Gathering copies of all written correspondence
  • Including any other evidence you may have, including pictures and police reports

Once your complaint is received, the case will be assigned a file number for future tracking. The State Commissioner can typically look into a range of claim disputes to determine if a company is behaving in an illegal manner.

Before you decide to accept a company’s low offer, learn more about your rights.

Talk to your agent about other options, and do some research on your own to see what the offer should be. You can file complaints and even go through the courts to get the right resolution.

If you decide that you’re ready to switch companies so that you can avoid problems in the future, then use a comparison site to find the ideal provider for your needs.

Try our FREE online quote tool to compare auto insurance rates! Enter your ZIP code below to get started!