You’ve been in a car accident. There are no injuries, luckily, but your brand-new vehicle has been pretty banged up. On top of the stress of being in an accident, you worry, “Will I receive the full value for my car? How will the insurance company value my car? What is the process?” The process of determining your car’s value after an accident includes understanding terms like actual cash value, replacement costs, and depreciation.
The Process of Determining Value
The car insurance valuation process begins after an accident. The purpose is to determine the value of the car pre-accident. Plus, repairing the car to the condition it was in before the accident. The first step in the process begins when the insurance company sends an adjuster to assess the damage. A claims adjuster does the following:
- Verifies an insurance policy exists for the insured person and/or property
- Assesses damages to property
- Evaluates the injuries and/or damages
One of the adjuster’s responsibilities is to determine if the car is considered a total loss. In other words, is the car “totaled?” Totaled, according to the insurance company, means the cost of repair exceeds the car’s value. If the car is deemed totaled, then the adjuster decides reimbursement by looking at a number of factors, including the actual cash value, depreciation, and replacement cost.
Actual Cash Value
The Actual Cash Value (ACV) of your vehicle is determined by subtracting depreciation from the replacement cost. Think of ACV as the consignment or used price. To understand depreciation, let’s go back to your car accident. Say your damaged vehicle is not brand new, but ten years old. An insurance company would subtract loss in value over time, age, and wear and tear from the value of your car. The formula for depreciation is:
Replacement Cost x Percentage Lifespan Used = Depreciation
Insurance companies also use consumer bluebook websites like Kelly Blue Book or Edmunds to determine ACV. According to Edmunds, “Claims adjustors from your car insurance company use a combination of dealer surveys, value guide books, online pricing sites, and actual private party sales to determine your car’s actual cash value.”
To negotiate a higher ACV, you will likely need to provide the following:
- Repair/maintenance history
- Proof or receipts of upgrades
- Receipt of services
Replacement Cost
Replacement cost is the price of the item (or car) if you were to buy it today. It’s the current retail price for the same make and model, without depreciation. According to Progressive, a good example is this scenario with a damaged couch:
Actual Cash Value
You’ll get $1,500 because that is your couch’s actual value after five years of depreciation.
Replacement Cost Value
You’ll get the value of a brand-new couch (similar model), which could be more or less than what you originally paid.
Insurance companies offer both ACV policies as well as replacement policies. With replacement cost coverage, the monthly premiums will be higher. It’s important to understand these differences before buying an insurance policy and/or after an accident.
Each type of coverage comes with its advantages and disadvantages.
What If I Disagree with the Insurer’s Valuation?
Once the adjuster makes an initial determination on the costs of repairs or total loss, you have the right to disagree, negotiate, seek out another estimate, as well as find alternate repair shops. If you need help navigating insurance companies or the negotiation process, then hiring an attorney could be advisable. An attorney can also be helpful if you’re in a sticky situation of trying to prove who was at fault.
Contact HS Law
It can be beneficial to contact a personal injury lawyer to discuss the car insurance valuation process after an accident. They have experience dealing with insurance companies in the negotiation process. HS Law, specifically, can help with the aftermath. They’ve handled thousands of personal injury cases and helped victims recover damages. The consultation calls are absolutely free.
