What to do if the insurance company is not giving you enought money to pay off a totaled car?

UPDATED: Sep 30, 2022

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What to do if the insurance company is not giving you enought money to pay off a totaled car?

We had a new vehicle. We were driving home from picking my husband up from the airport about 2 weeks ago. We were traveling straight down a 30 mph road and a man ran a stop sign and T-boned us. Our car has been officially totaled and we paid $31,000 for it just months ago. The insurance company is only offering us $26,000. We have to hand in our rental on Monday. This will leave a family of 3 drivers with 1 car. Why are we being so inconvenienced because of someone’s inability to drive? The other driver was ticketed at the scene. He ran that stop sign and totaled our car. He should be the one paying out not us.

Asked on June 7, 2017 under Accident Law, Virginia


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

The insurer does not have to give you enough money to pay off a totalled car, unless you are talking about your own insurer and you bought "Gap" insurance to ensure pay-off. Otherwise, when property, including a vehicle, is destroyed, all an insurer or the at-fault party has to pay is the property's then-current fair market value, which is usually less than the purchase price or remaining balance on recent financing due to depreciation; on the other hand, it may be more than what you paid if you got a particularly good deal, had reward points of some kind to help pay for a car, or bought from a friend or family member at below-market cost. (Or indeed, if someone gifted or gave you the car.) If the current value is less than you paid, you suffer a loss; if more than you paid, you have a windfall. Because what someone pays for a car varies so widely, the law uses the vehicle's then-current (e.g. "blue book") value as a consistent and readily determinable benchmark of fair compensation; accordingly, the current value is all you are entitled to.

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