Laura Berry is a former State Farm insurance producer and insurance expert.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Oct 19, 2021

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Here's what you need to know...

  • You must carry either comprehensive or collision insurance 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, the insurance adjuster 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 your 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 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. 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. So if you decide 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 purchasing 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.

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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 type of auto insurance coverage:

  • Comprehensive Coverage:

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

  • Collision Coverage:

Collision insurance pays for physical damage to your vehicle after it collides with or strikes another object. You can file a collision insurance claim if you hit a car, 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.

  • Mechanical Breakdown Insurance

Mechanical breakdown insurance (MBI) is something like an extended warranty on your vehicle. It covers repair or replacement costs for parts and systems of your car that break. However, MBI does not cover issues caused by normal wear and tear or broken parts caused by your vehicle’s failure to perform routine maintenance.

Though it doesn’t cover repair costs, you might want to consider adding GAP insurance to your auto policy if you have an auto loan. GAP insurance pays for the difference between what you still owe on your loan and the cash value of your vehicle after it is totaled.

You don’t want to end up paying on a loan for a vehicle you can no longer drive.

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 does actual cash value mean?

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 you’re filing against. Since it’s the pre-loss condition and not the new condition, depreciation is considered before a settlement offer is made.

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What happens when the cost of repairs exceeds the ACV?

The insurer will pay no more than ACV, even when the cost of repairs exceeds that number. The insurer will offer a settlement for a total loss rather than paying for repairs if this happens. 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 vehicle. 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 complex 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

You’re not entirely at the mercy of the adjuster in this situation. There is usually room for negotiation.

How do you negotiate the value of your vehicle after a total loss?

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 adjuster’s 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 the 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!