What’s my car worth to the insurance company?
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Written by
Chelsey Tucker
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Reviewed by
Daniel Walker
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UPDATED: Mar 19, 2020
It’s all about you. We want to help you make the right coverage choices.
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- Your insurance company will only pay to repair or replace your vehicle when you carry physical damage coverage or Uninsured Motorist Property Damage (UMPD)
- Comprehensive coverage pays for repairs needed after a loss caused by fire, theft, vandalism, and other non-collision losses. Comprehensive will pay for repairs needed after you collide with another object or car
- Under your Personal Auto Policy, there’s a limit to how much your auto insurance company will pay for your car when you’re filing any type of physical damage claim
- If you have a standard car insurance policy, the terms of the policy state that the company is only obligated to pay up to the car’s Actual Cash Value at the time of the loss
- Actual Cash Value is another term for fair market value. Companies calculate Actual Cash Value using several different guides and sales listings. Your vehicle’s worth can usually be negotiated when you file a claim
If you’ve been driving your car since you were a teenager, there’s a good chance that it has a name. Being attached to your car means that, if anything were to happen to it, you’d be devastated.
You carry auto insurance to help you pay for hospital bills and repair bills after you have a loss.
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Before you assume that your car is worth more than others like it, you need to learn how insurers value cars. This is what you should know before you buy full coverage:
Not All Insurance Policies Provide Coverage for Your Car
A basic auto insurance policy is one that includes only the insurance coverage options that are required by law.
If you decide to buy a car insurance policy with the state’s minimum coverage requirements, your insurer won’t pay for claims made for your covered auto. The only time your car is covered is when you’re not at fault in a collision loss.
If you want to protect a specific auto that’s listed on your policy, you need to add physical damage coverage.
Physical damage coverage consists of comprehensive and collision coverage, and each pay for a different type of damage loss. Comprehensive pays for non-collision losses cause by fire, vandals, falling objects, flood, and hail. Collision pays for most losses that happen when your car is moving.
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It’s Not Always Worth It to Buy Full Coverage
When you build a policy that has both comprehensive and collision, it’s called full coverage.
You have the option to buy full coverage on most cars with a clean title and no pre-existing damage. While it’s an option, it’s not always a good idea. Many times, carrying full coverage on an older car will cost you more in premiums than the car is worth.
How much will your insurer pay for your car?
Before you can make an informed decision on whether or not to add full coverage to your policy, you need to know what your car is worth in the eyes of your insurer.
How you value your car and how your insurer values your car are very different. In most cases, car owners confuse their love for their car for the monetary value. With insurers, it’s all about numbers.
Under your auto insurance contract, it says that you are only entitled to receive up to the Actual Cash Value of your car when you file a physical damage claim.
If you get into an accident and your damages exceed the ACV of your car, the car will be declared a total loss and you can decide whether or not to sign the car over to the insurer.
What is Actual Cash Value?
Actual Cash Value is a term that’s used in the insurance industry. This term is used to describe the valuation method used to settle a damage claim.
Insurers either use Actual Cash Value valuations or Replacement Cost valuations. With Actual Cash Value methods, the insurance company will factor in depreciation when valuing the property.
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How does your insurance company calculate the Actual Cash Value of your car?
Actual Cash Values can change from day to day. That’s why a company won’t determine the worth of your car until you file a claim when you have standard coverage.
When you file a claim, the adjuster will use a lot of resources and reports to determine if your car is repairable or totaled. Some of the different methods to calculating value include:
- Using valuation guides like Kelley Blue Book
- Using the National Association of Automobile Dealers to determine the depreciated value
- Accessing sales records through dealers and private sellers
- Comparing sales ads for similar models in the area
- Estimates from third-party appraisers if you don’t agree with the initial offer
Don’t Forget to Negotiate When You Are Settling a Claim
Upset driver After Traffic Accident
You don’t have to accept the first offer that you receive from your insurance adjuster when you’re settling a claim.
Before you accept any offer, you should do your research on your car’s value. Make sure to negotiate if you feel like the adjuster is low-balling you. Here are some tips to get a higher car value offer:
- Show your agent receipts for new parts and modifications
- Ask for a settlement offer that’s higher. Most companies can offer more without getting approval from a supervisor
- Ask for the adjuster to narrow the survey of car values
- Ask the adjuster to search for car prices in a larger area if you live in a small town
Is it worth it to buy full coverage?
You need to look up the current value of your car to see if you should buy full coverage.
If the premiums for full coverage is 10% or more of the car’s worth, it’s not in your best interest to keep the physical damage coverage.
If you are not happy with your insurer, you should shop around and find the best deal on the market. The most effective way to comparison shop is to use an online rate comparison tool. Enter your vehicle information, answer the questions, and get instant insurance quotes today.