Choosing Insurance for "New" Car

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Our "new" car (2002 Subaru Legacy Outback) was put in to service yesterday. Initially, we got Liability coverage only (in an amount quite a bit more than what our state requires).

We are now trying to decide if we want to add Collision & Comprehensive coverage as well.

What we have done with our cars in the past was start out with full coverage and then switch to Liability only once the Blue Book value was down to around $3-4,000.

This time around, it's harder deciding whether we need the additional coverage; it's hard to pin down the value of the car, because it had a "salvage" title.

We paid $3,000.
We were told by a dealer it would sell for around $5-6,000.
We were told by a State Patrol inspector that the salvage value would be around $6-7,000.
KBB if not for the salvage on the title would be around $13,000.

I asked our insurance company (GEICO) if we totalled the car and it was salvaged, how would they determine the value of the car? Their answer was very polite and about as clear as mud ... They said that they would "use their formula to determine the value of the car based on numerous factors such as the condition of the car prior to the accident among other things." My mental translation of that went something like this: "Oh that's a closely guarded company secret and if we told you we would have to take you out back and shoot you but basically we will pay what we feel like paying."

So, my question is, have any of you ever had your car declared salvaged by your insurance company? If so, what did you think about the amount they reimbursed you? Did you think it was fair? Did it come remotely close to compensating you for the replacement cost of the car?

I have looked for info on how insurance companies determine the value but I have only found "use the KBB value as a guideline" but that doesn't sound very definitive.

It's hard to decide whether or not to pay for something when you don't know exactly what you'll be getting!
Thanks to anyone who can share their past experiences.