Is My Insurance Settlement Fair After Totaled Car Loss?

A few weeks ago, I made a significant purchase when I bought a 2012 Ford Fiesta from Carmax for $12,000. Surprisingly, the Blue Book value for that car was only $10,000. Just a year later, this car got totaled, and State Farm is offering me $4,750. Should I feel overcharged or unfairly settled?

Did I Overpay for the Car?

Upon investigating the prices, I found that a new 2012 Ford Fiesta had a MSRP (Manufacturer's Suggested Retail Price) of $13,200. By the time I bought it, the Blue Book retail value for a car in 'good' condition with approximately 40,000 miles was just around $5,000 at a dealership. Carmax, known for its good value, likely offered a price close to this amount.

It's possible that the large discrepancy in the initial purchase price was due to the fact that the new loan included a payoff amount for my old car. So, my guess is that the old loan was rolled into the new one, and my insurance company is offering a fair settlement.

Did the Insurance Company Under-value the Car?

Both the overpayment and the under-value are issues. State Farm is obligated to offer the current fair market value of your Ford. At $4,750, they're within reason for a 12-year-old Fiesta. However, they understand that they are offering a low-ball amount.

You overpaid by a significant margin. The Blue Book value at the time of your purchase was more likely $10,000 at the most. Blue Book values are currently around $6,000 for a 2012 Ford Fiesta in 'good' condition. State Farm made a low-ball offer, but it's still within their rights.

What Can You Do to Get a Better Settlement?

Insurance companies prioritize their profit, and they're naturally trying to settle as cheaply as possible. Here are some steps you can take to improve your chances of a better settlement:

Research Blue Book and JD Power Values: Look up the Blue Book and JD Power values of your car. These standards can help you understand the fair market value of your car. Find Similar Cars for Sale in Your Area: Search for a car with similar features, mileage, and age in your local market. Sharing these prices with your claims adjuster can help convince them to offer a more fair settlement. Keep Detailed Records: Maintain detailed records of your car's purchase, any improvements you made, and its overall condition. Having this information can help build a strong case for a fair settlement. Consult a GAP Insurance Policy: If you financed your car and the gap between the car's value at the time of purchase and the remaining loan is significant, consider a GAP insurance policy to cover the difference.

In conclusion, while your insurance settlement may seem low, it's important to understand that insurance companies are trying to keep their costs down. By gathering the necessary documentation and market data, you can work towards a fairer resolution for your case.