If a car were totaled in an accident, the insured person would receive the market value of the car, which would be assessed either by the insurance company or by an outside agency employed by the insurer. This fair market value as determined by the insurance company could be more or less than the loan amount that had been taken on the car. The loan amount on the car would not have any bearing on the amount decided by the insurance company as fair market value.
If a person wishes to estimate the fair market value of the car, he/she should look at a car that is of the same type with similar accessories and options, similar wear and mileage. The sale value of that car could be taken as fair market value. To arrive at a correct value, the owner of the car should find the sale value of several cars and take the average of these values as the correct fair market value. Normally, the amount offered by the insurance company would be near this average value. If the offer is less than the figure arrived by the insured person, that person could negotiate the settlement value with the insurer, showing the figures obtained by that person.