How do insurance company determine the value of a car

How do insurance company determine the value of a car

Video How do insurance company determine the value of a car

After a car has been in an accident, the insurance company may need to determine if the damage is serious enough to destroy the car. To do this, the company will use the actual cash value (ACV), which is the car’s current market value minus depreciation. There are several ways to determine your car’s ACV, which can be helpful if an insurer decides to total your vehicle rather than pay a claim to repair it.

Some steps to determine the value of your car include:

  1. look for car price guides and websites like kelley blue book (kbb) and edmunds.
  2. Determine what you want to do with your car, such as trade it in, sell it to someone else or a car company, etc.
  3. compare similar vehicles for sale online.
  4. determine if your car is damaged or needs any repairs.
  5. determine other factors that may increase or decrease the value of your car, such as location, accident history, year of car, and number of owners.
  6. online price guides and estimators

    There are several factors that online price guides and estimators use to determine a car’s market value. this includes the current mileage, the condition of the exterior and interior, any mechanical problems, your zip code, and the year, make, and model of the vehicle. Fortunately, you can determine the value of your vehicle online. These are the best sites to help you determine the value of your vehicle:

    kelley blue book

    kbb is an industry leading automotive research company. You can see the value of your vehicle, list it for sale, buy new and used cars, and compare new and used cars online. however, there is a delay in determining the pricing information and you may overestimate the value of a vehicle.

    national auto dealers association

    nothing represents more than 16,000 franchised auto dealers and provides insight into automotive industry trends. You can also search for a new or used car and compare vehicle prices on their website. however, nothing focuses more on the wholesale price of the vehicle and assumes the car is in good condition, which could give you a higher value than your car is worth.


    edmunds provides a vehicle information resource. You can search for new and used cars, compare vehicles, get your car’s value, and view dealer inventory listings. The Edmunds Car Value Appraisal Tool allows you to view your car’s value and compare it to other KBB car values.

    It’s a good idea to compare the value of your car using several tools to get a better idea of ​​what it’s worth. To use Edmunds, Nada, and KBB, you’ll need your vehicle’s year, make, and model, vehicle identification number (VIN), and license plate number and state. You will also be asked a few questions about the condition of the vehicle and any damage to it.

    car values ​​defined

    There are also different types of car appraisals. These values ​​generally differ from your insurance company’s ACV and value determination, as your provider will consider your car’s depreciation and replacement costs when calculating value.

    • trade-in value: This is the value of your car after you trade it in at a dealer for another car. trade-in value is calculated after the dealer evaluates the condition of your vehicle and considers why they think they can sell it. the trade-in value is usually the lowest of a car’s values.
    • Private Party Resale Value: This is the value at which you can expect to sell your car directly to a private buyer. Your vehicle will be sold in its current condition at private party value and will have no warranty. the final price will be determined by similar vehicles and local market conditions, so these values ​​can fluctuate quite a bit.
    • Retail Value: Dealer retail value is the price a dealer will sell your car for after repairs or modifications have been made. this value will also include a profit margin for the distributor.
    • Certified Pre-Owned Value: A Certified Pre-Owned Value is the value of a vehicle that has been inspected by outside inspectors. Vehicles backed by Certified Pre-Owned Factors include a factory warranty and other benefits. Given the extra warranties and benefits the new owner will get, along with the cost of certifications, this is typically the highest valuation for a used car.
    • why does the value matter when my car is totaled?

      Insurance companies define a car as totaled when the expenses to repair the vehicle exceed the value of the car. Many insurance companies will reimburse you for your vehicle’s ACV in this case, which is the cost of your car minus any depreciation in its market value. If your vehicle is older, this means your insurance payment will not cover the cost of purchasing the same vehicle in a newer make and model.

      If you don’t agree with your car’s acv in a total situation, you can negotiate with your insurance company. You will need to show that the value of your car is greater than the value determined by your insurance company and you will need to provide detailed records of the maintenance of your car.

      If you own a rare or particularly expensive vehicle, it’s not a bad idea to have it appraised periodically by a licensed appraiser so you’ll have proof of its current or recent value in case it’s lost.

      actual cash value (acv)

      acv is used to determine how much of a payment you will receive for a totaled vehicle. it’s determined by the replacement cost of your vehicle minus depreciation, which takes into account things like age and wear and tear.

      Most insurance policies cover the actual cash value of your car in the event of a claim and will use a third party to determine your vehicle’s ACV.

      Replacement cost, or the cost to replace your vehicle with a similar and sometimes newer model at current prices, is available through some insurance companies. however, an auto insurance policy that includes replacement cost instead of acv will have higher premiums to offset the potentially higher payout with a claim.

      why does value matter if my car needs repairs?

      Even if your car sustains untotaled damage, knowing its value is important. Your insurance company will send a claims adjuster to inspect your car and determine how much it will cost to repair it and return it to its original condition. The adjuster will evaluate your policy, the reasons behind your car’s damage, and the actual damage to determine how much repairs will cost.

      After the claims adjuster determines the amount the insurance company is willing to pay to repair your vehicle, you can sign a release to accept payment and perform the repairs or decline the appraisal and attempt to settle the claim. If you decline the adjuster’s appraisal, it’s essential to understand your car’s value before attempting to negotiate with your insurance company.

      negotiate an insurance claim

      Car insurance companies are for-profit businesses like any other and want to pay the lowest amount possible to settle a claim. If you decide to negotiate with your insurance company on your claim, you must be prepared to show that your proposed estimate is more accurate than theirs.

      Looking up your car’s value with KBB, Edmunds, Nada, or even a third-party appraiser or claims adjuster can help you determine your car’s value and give you an idea of ​​what a fair payment is to settle a claim.

      If your claims adjuster and insurance company are unwilling to revise your estimate based on your argument and evidence, you may request a justification of your estimate. the objective of the negotiation is to reach a satisfactory agreement for all parties.

      frequently asked questions

        • what happens if my car is modified?
          • what is the best guide to determining the value of the car?
            • what other coverage can help pay for damage to my vehicle?

              additional resources:

              • the average cost of car insurance
              • cheapest car insurance companies
              • car insurance quote comparison
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