What is actual cash value in insurance?

Cars that are totaled are sold by insurance companies to salvage yards or rebuilders, who will repurpose a vehicle’s parts or attempt to rebuild and resell it. If the damage to a totaled car is so severe that it can’t be rebuilt or used for parts, then it may be sent to a scrap yard, which will recycle the metal. … read full answer

It’s estimated that car recycling is a $25 billion industry in the United States, with more than 12 million totaled vehicles being recycled annually. In the U.S. and Canada alone, recycled vehicles produce enough steel to make about 13 million new cars each year.

Keeping a Totaled Car

It is possible to keep your vehicle after it’s totaled, though it’s usually not recommended. If you decide to keep your vehicle, you need to notify your insurance company. When they send your claim settlement, the salvage value will be subtracted from the final amount since they won’t be able to sell the vehicle.

To learn more, check out WalletHub’s guide to totaled cars.

Actual cash value is the fair market value of the property today considering depreciation, age, etc. Replacement value is the amount it will cost to replace the property. For example, the ACV of a 15 year old refrigerator is minimal. Replacement cost is the price of a new, comparable refrigerator. ACV is determined by the property's age, condition and future useful life. Replacement cost will be the cost to replace a comparable item. Again using the refrigerator example, if you have a standard refrigerator with a freezer on top, insurance will pay to replace the refrigerator with a comparable new item, but it will not pay to buy a new side by side with lots of bells and whistles.… read full answer

New car replacement insurance makes it possible to replace a recently purchased car that suffered damage due to an accident, theft or another event, without losing the money you spent on it. When you purchase a new car, its value drops as soon as you drive it off the dealer’s lot. So, if you get into an accident that day, or even several months after purchasing your car, the amount of money you would be able to recover for its value through your comprehensive or collision coverage would be significantly lower than what you paid for it. However, new car replacement insurance would ensure you get the full amount.… read full answer

If you purchase new car replacement insurance, you would be able to recover the value of a new car of the same make and model at the time of your claim, minus your deductible. For example, if you purchased a new car for $25,000, it would likely drop $5,500 in value after you drive away from the dealership. Drivers who do not have new car replacement insurance would be able to recover no more than that lesser value ($19,500) minus their deductible after an accident. If you have new car replacement insurance, you would be able to recover the full $25,000 minus your deductible.

Most insurance companies estimate that the cost of obtaining new car replacement insurance may add as much as 5% to your premium, on average. This cost varies by company, car age and mileage, as well as the driver’s record. Some companies, including Concord Group and Shelter, offer this coverage at no additional cost.

New car replacement insurance isn’t available through all insurance companies. Well-known insurance companies like Geico, State Farm, USAA and Progressive currently do not offer new car replacement insurance. Others – like Allstate, Liberty Mutual and Travelers, do – but their policies vary widely.

Cars eligible for new car replacement coverage are assessed in two ways: age and mileage. Vehicles two years old or younger, or those that have driven less than 15,000 miles are usually eligible. Leased cars do not qualify for this type of insurance.

As cars happen to be a depreciable good, it might be a good idea to add new car replacement coverage to your policy.