What is Actual Cash Value?

The actual cash value of a vehicle is the total amount the vehicle is worth before an accident occurs. Insurance providers seek to determine this when they are trying to decide whether or not a car should be totaled or whether it can be repaired. After an accident occurs, insurance providers are going to try and determine if the damages to vehicle outweigh its actual cash value. If this is the case, then the insurer is not going to bother with trying to fix it, as this would not make any financial sense.

Actual cash value is something that a lot of drivers often wonder about, and this is with good reason. It's not easy to actually estimate the actual cash value of a vehicle, as each insurance provider is going to have its own way of calculating these numbers and their own auto policy restrictions. In fact, a lot of states are going to have some rules and regulations regarding how actual cash value is calculated, so you may want to look into this if you can. If you have a lot of information, then you're going to be much better off if an accident occurs and you are offered actual cash value by your insurance provider.

Ways of Determining Value

Car insurance providers are going to have a number of different ways that they will use to arrive at the actual cash value of your vehicle. One thing that many providers will do is to look at the book value of your car. Most of the time insurance providers will look to Kelley Blue Book to determine these values, but sometimes they will also look at NADA or Black Book. Sometimes, an insurance provider will just use this to determine how much to give you for your vehicle.

Another way that car insurance providers will try to determine your actual cash value is by looking at fair market value. This can sometimes be difficult to determine, and it's something that a lot of companies use alongside of book value. In this case, providers will try to get quotes for wholesale or retail prices. They will usually gather this info from local dealers in the area who are selling vehicles that are the same or similar to yours. A lot of times, though, these prices will be lower than the book value and your provider may argue that this is all your car is worth.

Sometimes, insurance providers are going to look to replacement costs to determine the actual cash value of your car. This doesn't happen often, and it's usually just when the car is so new that it does not have a book value or even a market value. In this case, insurers will look to the cost of a new vehicle of the same kind and then deduct some money for depreciation. How much they deduct for depreciation will be up to them, although you may be able to make a case for getting more money.

Negotiating with Your Insurer

If you feel like your insurance company is not being fair in its calculation of your actual cash value, then you may be able to negotiate with them on it. Depending on the laws in your state, you may even have some legal recourse in the matter. Whatever you do, you should first try to negotiate with them by sitting down to discuss how the figure was arrived at. Having this talk may make it a bit easier for you to understand the number you are being offered by your insurance provider.

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