How to Determine Value of a Car for Insurance
How to determine value of a car for insurance varies by state, but generally car insurance companies are not required to pay more than the fair market value of your car when it is totaled. Car insurance companies will often use valuation guidelines from Kelley Blue Book and NADA to determine the value of a car for insurance claims purposes.
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Ty Stewart
Licensed Insurance Agent
Ty Stewart is the founder and CEO of SimpleLifeInsure.com. He started researching and studying about insurance when he got his first policy for his own family. He has been featured as an insurance expert speaker at agent conventions and in top publications. As an independent licensed insurance agent, he has helped clients nationwide to secure affordable coverage while making the process simpl...
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UPDATED: Nov 6, 2023
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UPDATED: Nov 6, 2023
It’s all about you. We want to help you make the right car insurance coverage choices.
Advertiser Disclosure: We strive to help you make confident car insurance decisions. Comparison shopping should be easy. We are not affiliated with any one car insurance company and cannot guarantee quotes from any single company.
Our car insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different car insurance companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
- Insurance companies must calculate the value of damaged property before they can settle a claim
- The carrier is only required to pay the claimant up to what the car is worth in the fair market when a car is totaled
- It is the adjuster’s job to use valuation tools to determine what the car’s Actual Cash Value is
- The adjuster will reference valuation guides from Kelley Blue Book and NADA guides as a starting point
- The claimant can review the claims settlement offer and then negotiate with their agent to get a more than offered
When you file an insurance claim, your car is only worth as much as the insurance company says it is. It’s not how much you paid for the car or how much you financed the car for that the insurer uses to value your car.
This is why many people who are dealing with a claim after an accident are shocked to learn that their car holds a lot less value than they thought.
If you’re not aware of how your vehicle is valued when you file an insurance claim, it won’t have an impact immediately.
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It’s not until you’re in a position where you’re relying on your insurer to pay out for a replacement vehicle that you’ll realize why how your carrier values your car is important. Here’s what you need to know:
Understanding Your Insurer’s Obligations
Auto insurance is not a physical product it’s an indemnity contract. Your insurance company is required by law to provide you a copy of the contract that you’re entering into when you buy a policy.
Written in this contract, in somewhat litigious language, it explains what your insurer’s obligations are.
Even though comprehensive and collision offer you money to repair or replace your car, a carrier doesn’t have to give you enough to buy the same exact car that you totaled.
In fact, the carrier, under the terms of the contract, is only obligated to pay the claimant up to the car’sActual Cash Value when a property damage or physical damage claim is filed.
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What does Actual Cash Value mean?
All of the terms that may have a broad meaning are defined within the Personal Auto Policy contract.
Since Actual Cash Value might sound like a redundant term, it’s important that you know what it means in the insurance world before you assume that you’ll be getting more from a claim than you’re owed.
When it says that the insurer is obligated to pay up to your car’s Actual Cash Value, it means that the insurer will cut a check for the car’s replacement cost minus depreciation when the car is totaled after a loss.
Some cars have low values because the depreciate quickly or they are older. Other terms that are used to include ACV or fair market value.
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Who determines the value of your car when you file a claim?
If you file either a first-party claim or a third-party claim for damage to your vehicle, it will either be your insurer or the other party’s company that will issue you a claims check for your damages.
Typically, the other party’s insurer will pay you under Property Damage if the driver was at least 51 percent at fault for the crash.
Your insurance company will pay when you have full coverage and you were to blame for your own damages. It’s also common for the claim to be paid by your own insurer when the other party doesn’t have insurance or when it is a hit and run accident.
No matter which company pays, it will be the adjuster employed by that company who determines the value of the car.
What different factors can affect a vehicle’s Actual Cash Value?
There are a lot of different factors that can have an affect on your car’s value for insurance purposes. If you’re assuming a car that you’ve recently purchased or a car that you’ve taken good care of is worth more than it is, that can be dangerous.
Here are some of the many factors that can drive your ACV up or down:
- The make and model and how popular the vehicle is on the market
- The age of the vehicle
- The trim level and color of exterior paint
- The cosmetic condition of the interior and exterior of the car
- How many miles the vehicle has
- If the vehicle has had regular vehicle maintenance
- If the vehicle has any aftermarket parts that would boost its value
- Whether or not the car is in demand in the area
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What does the adjuster do to determine the car’s value?
Now that you know how condition, age, mileage, and features can affect your car’s Actual Cash Value, you might wonder if there’s a guide that helps adjusters look up the starting value of a vehicle.
Unfortunately, since there’s not one single reference tool that an agent representing the insurer can use, they might access a few different sources to come up with a final offer. These sources typically include:
- NADA value guides – a guide of values and other data used by lenders and dealers to price inventory
- Kelley Blue Book valuation guides – a consumer guide that buyers and sellers can use to price a used car
- Classified listings – showing how much vehicles being sold by owner or by dealer in the local vicinity are selling for
- Sales data – showing how much a specific make and model has sold for recently
Don’t Forget to Negotiate Value
The value that you’re offered by your adjuster is negotiable. It’s their job to keep the claims settlement low so it’s best for you to try and negotiate first.
You can ask for more because you’re not happy with the offer or you can hire an appraiser to come and value the car independently.
It’s not always worth it to carry full coverage. Make sure to look up what the depreciated value of the car is before you carry comprehensive and collision.
Use an online quoting tool to price the cost of full coverage and then you’ll be equipped with the knowledge you need to buy the right coverage. Use our comparison tool below to get started finding the best coverage for your situation.
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Ty Stewart
Licensed Insurance Agent
Ty Stewart is the founder and CEO of SimpleLifeInsure.com. He started researching and studying about insurance when he got his first policy for his own family. He has been featured as an insurance expert speaker at agent conventions and in top publications. As an independent licensed insurance agent, he has helped clients nationwide to secure affordable coverage while making the process simpl...
Licensed Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.