A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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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 26, 2021

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Here's what you need to know...

Auto insurance is one of those things that you need but never really want to use. Unfortunately, car accidents are occurrences in life that often can’t be avoided. When you’re in an accident that results in damage, it’s important to look on the bright side and appreciate the fact that it’s your car that’s banged up and not you.

Auto insurance policies don’t offer unlimited coverage to pay for vehicle repairs. If you’re filing a first-party or a third-party claim, the insurance company that’s responsible for paying for vehicle repair costs will take the time to assess the car’s damage for repair estimates. Here’s what you need to know before you file any damage claim.

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How much will a policy pay to repair a damaged vehicle?

All auto insurance policies have very specific limits that are defined in the policy itself. As with all legal contracts, an auto insurance policy has a very specific policy language that tells you what you’re paying for. If the legal contract didn’t include any limits or definitions, the company could be on the line for virtually any amount of money.

It’s important to review your Personal Auto Policy booklet and your declarations page so that you know how much insurance coverage you carry for all of the situations that can happen.

If you’re curious to know how much your policy will pay for damaged vehicles, it depends on whose vehicle you’re asking about. Here’s how limits are written into your policy:

Your Vehicle

If your covered auto is damaged, your policy will only pay for the damages if you carry either comprehensive or collision. Policyholders can file a claim against their own policy for help to pay for repairs or replacement as long as they have full coverage. Even full coverage policies have limitations that you should know about.

While your policy will pay for repairs when you have a comprehensive loss or collision loss, it won’t automatically pay for a brand new car. Most policies state that your physical damage coverage will only pay up to the car’s Actual Cash Value. Since an ACV can change from month to month, there’s not a fixed limit on your personalized declarations page.

Someone Else’s Vehicle

In most states, you’re required by law to pay for repairs when you’re liable for an accident. If you damage someone else’s vehicle, your Property Damage Liability coverage is the coverage option that will pay for the repairs and the property replacement. Unlike physical damage coverage, your Property Damage coverage does have a limit.

There’s often confusion surrounding how much Property Damage coverage a policyholder has. While there are liability limits that pay per person, the entire limit that you carry to pay for damaged property applies on a per accident basis. Even though there’s a liability limit, the coverage will only pay up to the third-party vehicle’s fair market value.

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How do auto insurance companies calculate a car’s Actual Cash Value?

Since auto insurance adjusters must have a starting point when they’re settling a claim, it’s important to learn the process used to calculate a car’s Actual Cash Value. It’s not until a claim is filed that the math will be performed. While you might assume that there’s a guide that all insurers use, there’s not. Companies use all of the following to calculate ACV:

  • Kelley Blue Book and other valuation guides
  • Dealership records for similar makes and models
  • Private party sales records for similar makes and models
  • Current sales listings for the same vehicle with the same specs in your area
  • Online pricing sites
  • Vehicle repair bills and invoices for aftermarket additions that raise value

When do auto insurance companies assess the damage of a vehicle involved in the claim?

Your auto insurance company will start to investigate your claim immediately after you file the incident claim. You’ll be asked to make a recorded statement of the events that led to the accident. You’ll also be asked to submit reports, photos and any other proof that you have that supports your version of events.

Once the records are reviewed, the adjuster will assign an appraiser to your case file to inspect your car in person and to take photographs.

Some companies will send you to a repair shop for estimates and others will send an estimator to your place of work or your residence to do the inspection.

It’s your duty as a policyholder and a claimant to furnish your vehicle for an inspection when your auto insurance company requests it. If you don’t have your vehicle inspected, your claim will more than likely be denied. After the photos are submitted and reviewed, the adjuster will be able to make a settlement offer.

Are you obligated to accept the first settlement offer?

Under your auto insurance policy, you have the right to negotiate when you don’t feel like your first settlement offer is fair.

In fact, most experts recommend that you negotiate back and forth because insurance companies always start with low offers. Make sure to take advantage of your rights as a consumer and don’t get taken advantage of.

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How can you increase your settlement offer for a damage claim?

When you’re going back and forth with your insurance companies there are a few tactics that you can use to bump up the value of your car or the amount of your offer. Claims adjusters won’t volunteer this information, but here are a few tips that can help you:

  • Ask your adjuster to narrow down the comparable list to just the top three they’ve researched
  • If there’re not many comparables in your area, ask for the adjuster to expand the region
  • Get a third-party estimator to inspect damages and you may be able to avoid a total loss

Now that you have a better idea of how claims work, you’ll be equipped with the knowledge that you need to get through the process.

If you’re not happy with how your claim was handled, it’s time to shop around. Use an online rate comparison tool to find the best rates and switch carriers to one that you can trust. Enter your zip code in our FREE comparison tool to get started!


  1. http://www.state.nj.us/dobi/ins_ombudsman/wysk2.htm
  2. http://www.edmunds.com/auto-insurance/how-car-insurance-companies-handle-car-accident-claims.html
  3. https://www.irmi.com/articles/expert-commentary/what-exactly-is-actual-cash-value
  4. http://www.claimsjournal.com/news/national/2013/12/05/240841.htm
  5. http://www.injuryclaimcoach.com/personal-auto-policy.html
  6. https://www.scc.virginia.gov/boi/co/pc/auto/PP00010105.pdf
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  11. http://www.investopedia.com/terms/a/automobile-liability-insurance.asp
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  13. http://www.edmunds.com/auto-insurance/a-total-loss.html
  14. http://www.360financialliteracy.org/Topics/Insurance/Cars-and-Auto-Insurance/Filing-an-Auto-Insurance-Claim
  15. http://www.iii.org/article/how-do-i-file-claim
  16. http://www.insurance.ca.gov/01-consumers/105-type/95-guides/01-auto/upload/AutoBodyRepairConsumerBillOfRights2.pdf