Does Erie offer new car replacement insurance?

Actual cash value in car insurance is the amount a car is worth after taking factors such as age, mileage, and cosmetic damage into account. A vehicle’s actual cash value (ACV) is calculated by subtracting the vehicle’s depreciation from its original price.

Most car insurance policies will pay a vehicle’s actual cash value if the vehicle is ... read full answertotaled in a covered scenario. In this case, the ACV will reflect how much the car was worth immediately before the damage occurred.

Example of Actual Cash Value in Car Insurance

• You purchase a new car for $20,000.
• On the way home from the dealership, another driver hits you and totals your car.
• You receive a payout for $18,000, the car’s actual cash value.

Even though you just paid the sticker price for this car, the actual cash value reflects the fact that it was technically a used car right before the accident. In fact, the average car depreciates about 15% - 20% in the first year of ownership and 9% - 11% just for driving off the lot.

How to Get More Than a Car’s ACV From an Insurance Payout

If you want to receive more than a vehicle’s actual cash value in the event of a total loss, you can opt for a policy add-on like new car replacement or gap insurance. But bear in mind that these options will increase your premium since the insurer is agreeing to pay you more if you file a total loss claim.

An insurance company determines the value of a totaled car by considering factors such as the vehicle’s make and model, year, and mileage. A vehicle is considered totaled when the cost of repairs approaches or exceeds the car’s actual cash value (ACV), which is what the insurer says the car was worth prior to being damaged. If the insurer declares the vehicle a total loss, they will pay out any insurance claims based on the ACV.... read full answer

Factors That Affect a Car’s Actual Cash Value (ACV)

• Make and model
• Year
• Mileage
• Depreciation
• Accident history
• Mechanical problems
• Wear and tear
• Cosmetic problems
• Local demand for similar vehicles
• Sale prices of comparable vehicles in the area

It’s important to keep in mind that the ACV is not the same as the cost of purchasing a replacement vehicle of the same year, make and model. Vehicles begin to depreciate quickly after they’re driven off the lot, so even if your car is relatively new, the ACV will probably be significantly lower than what you paid for the vehicle in the first place.

If you think your insurer’s ACV calculation is too low, then you should send a counteroffer that includes your justification for why the car was worth more prior to being totaled. This may include an independent appraisal, receipts for any features you added, and prices of comparable vehicles. There are several resources online that you can use to research your car’s value, including NADA Guides and Kelley Blue Book.

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

If your car is totaled and you still owe money on the loan, the insurance company will pay your lender for the car’s value, and you will be responsible for any remaining balance if the check is less than the loan amount. If you have gap insurance, it will cover the difference between the car’s value and the loan balance. Otherwise, you will need to continue making payments for as long as it takes to bring your loan balance to zero.... read full answer

If your car is totaled and another driver is at-fault, their liability insurance will pay for the car’s value up to their policy limits. If you were at fault, you can file a collision claim. After you receive a settlement from the insurance company, you can determine if you still have a balance left on your loan.

After your lender has gotten the insurance check, you can file a gap insurance claim immediately, assuming you previously purchased coverage and still owe money to your lender. Be sure to follow any instructions in your policy. For instance, some gap insurance policies instruct you to continue making payments to your lender until the claim can be processed.

Unfortunately, your options are limited if you don’t have gap insurance and your total loss check does not cover your loan balance. You can try to negotiate with the insurance company to have them increase their estimate of your car’s value. However, you will need evidence that your car was worth more than the insurer calculated, and there is no guarantee that you will get more money. Otherwise, you are stuck continuing to make payments, though you could try asking your lender for a payment plan.