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I know this is really contrary to what a lot of people believe in. This is from my nearly 10 years of experience in the insurance industry. I'll try to make it quick.

Insurance has its root in tort laws. There are two parts to an insurance claim: 1) liability, and 2) payout.

Let's talk about #1, liability.

The make-whole doctrine:

When someone, due their negligence, causes some damage to you, they are liable to make amends to restore you to the condition before the damage was done. It is only fair that you be compensated for the damage.

Let's say you're walking down the street with your $100 jacket, and someone flicks a cigarette onto your jacket, causing irreparable damage to your jacket. It's only fair that they give you another $100 jacket, no?

Not exactly. The make-whole doctrine states that the stupid person who damaged your jacket is only required to restore you back to the condition right before the cigarette landed on your jacket.

So your jacket isn't exactly worth $100 since it's used. He only has to give you another used jacket in the same condition as before. He has made you "whole", as you were before the accident.

If you demand a brand new jacket, this is not fair because it would make you "more than whole". You had a used jacket. The cigarette damaged a used jacket. You get another used jacket.


#2 payout:

Once we know how much to pay, who should pay? Obvious the dumbass should pay, but if he can't afford to pay for a used jacket, he has to buy insurance to cover his legal liabilities when he can't pay himself.

So for $5 a month (made up number) insurance will pay for a limited number of stupid acts he may commit. They'll pay on his behalf.


We all know insurance companies don't want to pay out anything at all.

They invented this concept called a "total loss". It says that if the cost of fixing the jacket exceeds a certain percentage of the used jacket on the market, they're not required to fix the jacket for you. Instead, they can just pay you the price of another used jacket.

Their whole goal is to pay out the least amount of money.

They'll pay the least of: a) repair cost, or b) replacement cost - salvage cost.

If it costs less to fix the jacket, they'll fix it. If they can pay you something less than the repair cost, they'll just buy the jacket outright and they'll pay for the jacket in the condition it was in before damage. Then they'll ebay the jacket to recoup their loss.


It sounds fine, but let's say you bought a $100 jacket, and added $500 of customizations to it, as all 240 owners do

Then getting a check for $60 and losing the jacket doesn't sound like a good deal at all.

What you need to do is make them pay $560 for the cost of the jacket and the customization cost. It will cost you $60 to buy another used jacket and redo all the mods.

Insurance companies say hell no. We declare your jacket a total loss. We only pay $60.

You say hell no. Screw the total loss claim. Pay me the actual replacement cost.



The "total loss" is a way for the insurance company to limit their payout.

Any time you're faced with a claim that the insurance has declared a "total loss", you should always challenge their appraisal. You should get the actual cost to replace the item, which is much, much higher than the book value they use to pay out.


The reason I said you should never declare a vehicle a total loss is you just shot yourself in the foot. You did the insurance company's work for them. You just allowed them to pay you less money than you deserve.

Do you want more money that you reasonably deserve? If so, don't declare the car a total loss. Let the insurance do that and fight the appraisal.

They always lowball you on total loss claims and use really low prices. They then sell your car at the salvage auction for pretty much what they paid you. In the end they make money.