Texas Total Loss Settlement Rules: Dispute a Low Offer

A Texas insurer owes the actual cash value of your totaled car, its fair market value just before the loss, minus your deductible, and your own insurer must give you a reasonable explanation of how it reached that figure. The offer comes out of a computer valuation, so you win on its inputs: wrong options, mileage or condition, mismatched comparables, and local dealer quotes that price your car higher. If the adjuster holds firm, appraisal under your policy sets the number, and 98% of Texas auto appraisal awards in a Texas Department of Insurance (TDI) study came in above the insurer's first offer. Today, email the adjuster for the full valuation report and hold the title until you accept a number.

What the insurer must pay and explain

Collision coverage, or comprehensive for hail, flood, fire and theft, pays for the repair or up to the car's actual cash value, minus your deductible. When repairs would cost more than the car is worth, the insurer pays the lower figure and declares a total loss. These rules shape the payment:

• Market value, priced by software. Actual cash value is the car's fair market value: the current cost to replace it minus depreciation. Insurers estimate it with computer programs and databases.
• A reasonable explanation. Texas Insurance Code section 541.060 makes it an unfair settlement practice for your insurer to skip a prompt, reasonable explanation of the policy and factual basis for a compromise offer, or to refuse payment without a reasonable investigation. Use it to get the report, the comparables and the dollar value of each adjustment in writing.
• A good-faith settlement. Once its liability is reasonably clear, the insurer must try in good faith to settle promptly, fairly and equitably. Texas law also lists forcing a policyholder to sue, by offering substantially less than the policyholder later recovers in court, as an unfair claim practice.
• Tax and fees stay out. The Fifth Circuit, the federal appeals court covering Texas, holds that actual cash value under Texas law excludes the taxes and fees you pay to buy a replacement. In that 2024 case, even a policy promising the "applicable sales tax" paid nothing extra, because a total-loss settlement is not a sale under Texas law. Your next car carries 6.25% motor vehicle sales tax on its sales price, and the settlement check gives no credit against that tax.
• What adds value. Receipts for upgrades, custom parts and recent maintenance rarely raise the payment, while a major item such as a rebuilt motor can.

Deadlines on your own policy

Texas's prompt-payment law puts your own insurer on this clock:

What to do today

1. Request the valuation in writing. Email the adjuster the letter below.
2. Check your car's line. Match the year, trim, engine, drivetrain, packages and mileage against your window sticker or build sheet, your registration and your latest service invoice. The valuation report checklist covers each field.
3. Price your car locally. Get written quotes from two or three used-car dealers near you, since listings ask more than cars sell for, and save local listings for the same make, model and year with similar miles, keeping the VIN, price, mileage and seller phone for each.
4. Document what the report missed. Gather pre-loss photos and receipts for special features, custom parts and major repairs.
5. Send one written counter with every attachment, and ask for a claims supervisor's review if the adjuster stands by the first number.
6. Hold the title. Signing it over is how you accept the offer. Texas lets an insurer enforce a full and final release on a compromise of a disputed claim, so sign a release only for a number you accept.
7. Demand appraisal in writing if a gap remains after the insurer answers your counter.

Where it splits

• If the claim is with the other driver's insurer, you have no contract with that company and no appraisal right. Your moves: file a TDI complaint, which that company must answer in writing; file under your own collision coverage, if you carry it, after which your insurer pursues the other company and any recovery can return your deductible; or sue the at-fault driver in justice court, which hears civil claims up to $20,000.
• If you want to keep or repair the car, tell the insurer quickly. It subtracts the salvage value, meaning what it would get for the car at auction. If the car counts as salvage because repairs cost more than its pre-loss value, the insurer reports it to the Texas Department of Motor Vehicles within 30 days of paying, you need a salvage title before you sell it, and it must be rebuilt and pass inspection before it goes back on the road. Many policies let the insurer decide whether the car is a total loss, and repair costs above your payment are yours. See keeping a totaled car.
• If you have a loan, the insurer usually pays your lienholder first and sends you any remainder. If you owe more than the payout, the shortfall is yours unless GAP coverage pays the difference between the car's actual cash value and the loan balance. See totaled car with a loan balance.

Your leverage

• Appraisal. Every Texas personal auto policy delivered, issued or renewed since January 1, 2026 must contain an appraisal clause, and nearly all earlier policies have one. Either side can demand it; each hires its own appraiser, the two choose an umpire, and an amount agreed by any two of the three binds you and the insurer, except for fraud, accident, material mistake or an award made without authority. You pay your appraiser and half the umpire's costs; check your policy for the deadline to demand it. In TDI's study of Texas auto appraisals on claims from 2020 to 2023, most involving totaled cars, 98% of awards beat the insurer's first offer, about half by $2,100 to $5,900, and over half were finished within a month of the demand. On policies issued or renewed from March 1, 2027, a new TDI rule sets fixed steps, starting with each side naming its appraiser within 20 days of the demand.
• 18% interest. When your own insurer owes the claim and misses a prompt-payment deadline, it owes 18% a year interest on the claim as damages, plus your reasonable attorney's fees.
• Unfair settlement suit. A policyholder who wins a chapter 541 case recovers actual damages, court costs and attorney's fees, and a court can award up to three times actual damages if the insurer acted knowingly. Send written notice of your complaint and damages at least 61 days before you sue, and file within two years of the unfair act or of when you discovered it or should have. The Texas bad-faith guide walks through both laws.
• TDI complaint. File through the TDI auto complaint page or call 800-252-3439, 8 a.m. to 5 p.m. Central, Monday to Friday. The company has 15 days to answer TDI, plus a 10-day extension on request. TDI can ask your insurer to justify the amount.

Call a Texas insurance lawyer when the gap is larger than the justice court limit, or when your own insurer misses a prompt-payment deadline or ignores your appraisal demand.

Letter to the adjuster

Subject: Total loss claim [number]: valuation report and revised offer

I received your total-loss offer of $[amount], dated [date], for my [year, make, model, trim], VIN [VIN]. [On your own policy: Under Texas Insurance Code section 541.060(a)(3),] please send me in writing the basis for this offer:

1. The full valuation report, with each comparable car's price, mileage, options, location, and VIN or listing source.
2. The dollar amount and reason for every adjustment and deduction, including any condition adjustment.

Your report lists my car as [wrong item]. It has [correct item], shown in the attached [document]. These cars for sale near me match it: [VIN, price, mileage, seller and phone for each]. I also attach written quotes from [dealer names]. Please revise the offer to $[amount], less my deductible, or explain in writing why each item leaves your figure unchanged. [On your own policy: If your reply still leaves a gap, I will demand appraisal under my policy.]

[Name], [claim number], [phone], [email]

Today

Today: email the letter, pull your window sticker and latest service invoice, and request two dealer quotes.

Next comes the insurer's written answer: a revised report or its reasons for holding firm. If the revised number is right, sign over the title and watch for payment. If it is still low, send your appraisal demand and your TDI complaint the same day.