How does an insurance company determine car value?

FREE Car Insurance Comparison

Compare quotes from the top car insurance companies and save!

Secured with SHA-256 Encryption

Here's what you need to know...

  • You must carry either comprehensive or collision for physical damage to your vehicle to be covered under your own insurance
  • Your insurance will pay up to the Actual Cash Value (ACV) of the vehicle minus your coverage deductible when paying out a claim for damage
  • ACV is the value of the vehicle in pre-loss condition and does factor in depreciation based on age and wear and tear
  • To assign a value for pre-loss condition, adjusters will use valuation guides, private party sales, and dealership sales information
  • You are free to negotiate your car’s value if you don’t feel like your settlement offer was fair

Start comparing car insurance rates now by using our FREE tool above! When you’re building an auto insurance policy, you’re more worried about limits and pricing than you are about claims processing procedures. It’s not until you need to file a claim for damage that you car valuation any thought.

Perhaps the most controversial part of the claims settlement process is determining the value of the insured property.

This is because a car is almost always worth more to its owner than it is to the insurance company. If you’re convinced that you haven’t been offered a fair settlement or you simply want to be prepared for the process before you ever have a loss, read this guide and you can find out how the insurer will assess value and what you can do to get more.

Do all insurance policies pay for your auto repairs?

Not all auto insurance policies will pay to repair or replace the covered auto. If you decide that you want to buy a basic car insurance policy with bare minimum coverage limits and no added coverage options, you’re responsible for repairing your own car or buying a new one after it’s damaged. The only time this isn’t true is when you’re in a non-fault loss and the other party’s insurance takes responsibility for repairing your vehicle.

When will your policy pay for vehicle repairs or replacement?

If you want the added protection and peace of mind on your own policy, you’ll need to pay for comprehensive and collision physical damage insurance. It’s also possible to file a damage claim if you carry Uninsured Motorist Property Damage on an older vehicle that doesn’t hold much value. Here’s a breakdown of the perils covered under each coverage:

  • Comprehensive:

Pays for physical damage caused by fire, theft, falling objects, hail, flood, wind, vandalism, windshield breakage or live animals.

  • Collision:

Pays for physical damage to your vehicle after it collides with or strikes another object. This can include a vehicle, fence, tree, building or any other type of real property. It’s common for collision to pay when you’re at-fault and not when the fault is on the other party’s shoulders.

  • Uninsured Motorist Property Damage:

UMPD pays for physical damage to your car as a result of a collision with an uninsured driver. You don’t need full coverage to purchase this, but your policy will only pay up to $3500 for repairs if you don’t have collision.

What is the limit your insurer will pay?

On your declaration’s page, it will show you in black and white just how much coverage you have for Bodily Injury claims and for Property Damage claims.

When you purchase liability insurance, you select the limits of liability that you want to carry.

It’s not as straightforward with your physical damage coverage. Instead of naming a stated limit for how much your policy will pay for a comprehensive or collision claim, it will say ACV. This means that the standard Personal Auto Policy will pay up to the car’s Actual Cash Value after assessing the damage.

What is Actual Cash Value defined as?

As the name implies, Actual Cash Value is what the vehicle is actually worth. While it might sound very straightforward, there’s more to it than that. ACV is the fair market value of the car in its immediate pre-loss condition minus the deductible that you hold on the coverage your filing against. Since it’s the pre-loss condition and not the new condition, depreciation is considered before a settlement offer is made.

What happens when the cost of repairs exceed the ACV?

The insurer will pay no more than ACV, even when the cost of repairs exceeds that number. If this happens, the insurer will offer a settlement for a total loss rather than paying for repairs. When a car is totaled, you have the option to keep the salvage titled vehicle or to take a check for the entire value of your car. This is why accurate valuation is so important.

What do adjusters use to calculate ACV?

There’s not just one given way to calculate a car’s value. Insurers will use several different tools and guides to determine how much it would cost to replace the asset with a vehicle in a similar condition. Calculations can be difficult for unique vehicles without many comparisons. Here are some of the different methods adjusters use:

  • Professional appraisals
  • Car value guides
  • Sales reports for private party car sales in the region
  • Sales reports for dealership sales in the region
  •  Car history reports

How to Negotiate the Value of Your Vehicle to Avoid Total Loss Offer

Most claims adjusters won’t volunteer the fact that the value they calculate is highly negotiable. You must remember that car insurance companies are in business to earn profits and that it’s the adjusters job to try and close your claim with the smallest valuation. This is why you’ll need to ask the adjuster how the ACV was calculated before you sign any types of settlement documents. Here are a few ways that you might be able to get a higher offer to avoid a total loss or to get the amount you think is fair:

  1. Print out retail values from sales sites and newspapers
  2. Ask for the insurer to narrow down the pool of comparisons for a higher average
  3. Advise the adjuster of aftermarket parts or updates you made on the vehicle
  4. Show proof vehicle was in good or excellent condition prior to loss
  5. Ask for a third-party, independent appraiser

If you’ve filed a claim for damage in the past and you’re not happy with how it was settled, it might be time to do business with a carrier you can trust. The first step is to find a list of companies with high claims satisfaction ratings. Then, use an online insurance rate comparison tool and price shop coverage from these providers in just minutes. Enter your zip code in our FREE tool below to start comparing car insurance rates now!

Are you looking for free insurance quotes?

Your one-stop online Car Insurance guide. Get a Free Quote Now!