How Condition Adjustments Can Reduce Auto Insurance Payouts

Auto Insurance paper on clipboard with red toy car and car key placed on top

After a serious accident, an insurance adjuster will determine the value of your car to tell you if it's totaled, and what you should expect as a payout. These determinations are made based on the condition of your vehicle and the damage it has sustained, among other factors. So-called condition adjustments can result in the insurance company paying you less than you expected.

Understanding how the condition of your car impacts its value is important when you're waiting for a payout on a totaled car. Insurance companies have strict laws they must follow to come to the value of the car, but they can pay less if the valuation process deems the vehicle to be in poor condition. Find out what you can do to avoid this kind of loss on your insurance payout below.

What Is a Condition Adjustment?

A condition adjustment alters the value of a vehicle based on damage beyond normal wear like torn seats or dented body panels. This applies when your vehicle is totaled—damaged so badly it will cost more to fix than it's worth—and the insurance company is determining the actual cash value (ACV) to pay you for the vehicle. The ACV is the value of your vehicle in the condition it is in today including depreciation, condition and modification.

Depending on the state, your insurance company can use several tools to get the value for your car. It may take an average of comparable recent sales in your area, use the National Automobile Dealer's Association value or it may use a state-approved third-party valuation company to get a fair price. The insurance company is not allowed to just make up a number, but how it handles this value when rating for condition may feel somewhat subjective.

That's because condition adjustments are based on rubrics for multiple parts of a car. Each company has its own system, but they'll generally be specific in their assessment. For example, they may note things like the number of stains or tears on the interior upholstery and adjust accordingly. For serious defects, an insurance adjuster may take several hundred to over $1,000 off the top of the value of your vehicle, leaving you with a smaller payout.

If you want to understand how the insurance adjuster reached the condition ruling on your vehicle, you can use something like the Kelley Blue Book Condition Quiz to evaluate your own vehicle. Look at the defects of your vehicle objectively. If you feel the insurance adjuster has seriously down-rated the condition of your vehicle, contact them to see if there may be steps you can take to challenge their evaluation.

How Can You Protect the Value of Your Vehicle?

Maintaining your vehicle is the best way to keep it in good condition. While vehicles are rapidly depreciating assets, it's possible to keep a lot of value in the car with good care. This way, when you go to sell the vehicle or get a payout from an insurance company, you'll maximize the money in your pocket.

But keep in mind, insurance condition adjustments are a game of subtractions. You likely won't add value to your vehicle by keeping it in good condition, but you can prevent further deductions by maintaining your vehicle well. Since cars aren't like houses, and typically don't gain value with improvements, avoid over-investing with expensive maintenance or parts.

Some things you can do to protect the value of your vehicle include:

  • Staying on top of regular maintenance including oil changes and filter swaps
  • Address mechanical problems as soon as possible to prevent them from worsening
  • Protect your clear coat on your paint with wax treatment
  • Have your vehicle's interior detailed on a semi-regular basis
  • Put seat covers and floor mats over upholstery and carpeting, especially if you have pets or children
  • Don't smoke in your vehicle
  • Rotate your tires and keep them properly inflated
  • Avoid automatic car washes
  • Replace tires when they start to go bald

If you disagree with the insurance adjuster's findings regarding the condition and value of your vehicle, you do have the right to hire an independent appraiser. Independent appraisers will assess your vehicle's value and can negotiate on your behalf with the insurance company. This may help you get a bigger payout.

You may also try to get more for your car if you've installed expensive aftermarket components. If you believe the pieces of the car divided are worth more than the car put together you can try to get the insurance company to adjust your payment, but this may require complicated paperwork such as affidavits from mechanics.

How Can You Save on Your Insurance Premiums?

More than negotiating with the insurance company on a few hundred bucks related to condition, you may see bigger savings by dropping the price of your insurance premiums altogether.

The steps you can take to get better insurance premium costs include:

  • Shopping around: Submit individual quote forms, use a broker who can compare and even try out some free price comparison tools to see if you can find a better price. Experian can help you compare car insurance providers and save.
  • Maintaining a clean driving record: Tickets and accidents make your insurance go up, so driving safely can get you a better rate.
  • Improving your credit: Your credit history has some impact on your insurance premium pricing as insurance companies in many states can use a credit-based auto insurance score to help them set your price. By improving your credit you could potentially get better rates on your car insurance.

If you've recently found out you will lose some money on an auto insurance payout, try to balance this loss with other strategic insurance savings.

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