How do I value my car for insurance purposes?
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UPDATED: Sep 17, 2021
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- When you’re buying insurance, it’s important to select the right coverage options so that you’re protected when you’re involved in an accident or when your vehicle is damaged
- It doesn’t always make sense to carry full coverage on a vehicle when the car is already paid off
- Knowing what your car is worth for insurance purposes is important
- Your insurance carrier will only pay up to your car’s fair market value when settling any type of damage claim
- Vehicles that are higher in demand at the time might not depreciate as quickly
You create a lot of memories in your car.
When you’re first licensed, you enjoy newfound freedom in your first car. You can journey to new neighborhoods, build a sense of confidence in yourself, and bond with friends all from behind the wheel. In this sense, a car can hold a lot of sentimental value.
While your car is special to you, sentimental value is generally higher than the value that insurance companies use to settle claims.
Since it’s your auto insurance company that determines the value of your car after it’s damaged, it’s good to know what the value of your car is for insurance purposes.
Here’s a guide to familiarize yourself with the terms of your policy and the valuation process itself.
When will your policy cover damage to your auto?
If you get into an accident or your car is vandalized, there’s no guarantee that your policy will cover the repairs that your car needs.
If the damage is only cosmetic, you might be able to cope with the scrapes and dents, but paying for mechanical repairs out of pocket without any help from your insurer can break the bank.
It’s always important to know whether your policy will pay for first-party damage or not. For your policy to cover your damage losses, you may need to carry a few different coverage options on your auto policy.
Here are the first-party coverages that you can carry that will all pay for your vehicle repairs in different scenarios:
- Comprehensive – Applies when your car is damaged after a fire, theft, flood, vandalism, explosion, or an incident involving a live animal
- Collision – Applies when you’re involved in an accident with a vehicle or an object. Most of the time collision pays when you are to blame for the crash
- Uninsured Motorist Property Damage – Applies when your car is damaged in an accident with an uninsured driver and you don’t have collision coverage
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How much will your policy pay for a first-party damage claim?
If you’re carrying full coverage on your policy, you have peace of mind in knowing that you can lean on your protection when you need it. Your insurance company lists what they will and will not coverage under each coverage.
Just like there’s a limit to the perils that are covered, there’s also a limit to how much your insurer will pay when you file a claim.
All insurance companies define how much you’re entitled to receive when you file a claim for damage to your covered automobile.
The contract won’t give you a fixed number, but it will say that the insurance company only has to pay up to the car’s Actual Cash Value. This is the value that the insurer calculates when the adjuster is investigating the claim.
The actual definition of the term is the car’s replacement cost minus depreciation. It’s up to the insurance adjuster to determine how much a car costs to replace and how much it has depreciated when there is a claim to settle.
Claims adjusters are the professionals who are ultimately in charge of calculating the Actual Cash Value of your car. Since values change each and every month, the company won’t spend the resources calculating the value of your car until you have a claim where the damage could exceed the value of your car.
If you’d like to know how the value is determined before you’re in a situation where you need to file a claim, this information can help you.
Adjusters have access to a lot of different resources that can help them with their duty of valuating property. There’s not just one tool that’s used. Some of the standard resources that can be used include:
- Kelley Blue Book valuation guides
- National Association of Automobile Dealers used car value guide
- Sales records released by dealers
- Private party sales listings
- Comparable sales in the private market
What happens if you don’t agree with the value the insurer uses?
If it costs more to repair your car than it’s worth, your car will be declared a total loss. This is why you need to review valuations closely. If your car value is too low, it could take very minor damage to total your seemingly okay car.
You have the right to question the value when you get your claims paperwork.
If you don’t agree with the valuation of your car, you can start to do research on your own.
Start by printing local sales listings and valuations with your vehicle information. You can also ask that the insurer narrow the search field to include only a few comparable options. This will typically bump up the average value.
You should always calculate the value of your car before you elect to carry full coverage. If you think it’s worth it to buy a fully comprehensive policy, you should get quotes.
Use an online comparison tool, get instant quotes, and find a low-cost full coverage auto insurance policy. Use our free tool now to save as much as possible on your car insurance!