How does the insurance company determine the value of a totaled car?

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.

Yes, an insurance company can force you to total your car because state laws regulate when cars need to be totaled. Your only option is to negotiate with your insurer about the car’s value, as convincing the insurer to adjust the value might affect whether the car has to be totaled according to state law.... read full answer

When an Insurance Company Can Total Your Car

Cars are totaled when the cost of repairs exceeds either the vehicle's pre-crash value or a specific total loss threshold established by the state. For instance, in New York, a car is considered totaled if the cost of repairs is more than 75% of the vehicle’s actual cash value (ACV). Total loss threshold laws account for the fact that damage is often more extensive than it first appears.

It’s also important to note that the ACV is not the price you paid for the car. Instead, the ACV is an approximation of the car’s worth just before it was damaged, so it factors in things like depreciation and mileage.

What You Can Do If Your Insurance Company Wants to Total Your Car

Even if you don’t want your insurer to total your car, you can’t argue with your state’s total loss threshold or ask the insurer to use a different system. However, you can argue that your car was worth more than the ACV chosen by the insurer.

Just bear in mind that you cannot simply choose an estimate based on your own opinion. Instead, you need to provide justification for your estimate of the car’s value, such as an independent appraisal, photographs of upgrades or modifications you made to the car, and/or the prices of comparable vehicles for sale in the area.

If the insurer does not agree with your statements regarding the car’s ACV, you can reach out to your state’s insurance regulator for help. You can also seek arbitration or litigation, though legal fees are likely to decrease or even negate any monetary gains that you make.

When your car is a total loss, it means the cost to repair the car exceeds the value of the car. If your car is declared a total loss your insurer may replace your totaled car with an equivalent one or issue payment for the actual cash value of the totaled vehicle.... read full answer

Once you file a claim, the insurance company will determine whether the car is a total loss. Depending on your state’s laws, your car may be totaled if the cost of repairs exceeds a certain percentage of the car’s value, such as 75%. If your state does not have a specific total loss threshold, your vehicle will be considered a total loss if the cost of repairs plus the salvage value is greater than the car’s actual cash value (ACV).

Insurance Payout for a Total Loss Claim

For a car that was totaled by an accident, you will be reimbursed by the other driver’s property damage liability insurance if they were at-fault or your own collision insurance if you caused the wreck.

If the damage was caused by something other than an accident, like vandalism or a natural disaster, you can receive a total loss payout from your own comprehensive coverage.

What to Do If Your Car Is a Total Loss

• If you think the insurer undervalued your car, you can present evidence and negotiate.

• You will likely need to send your insurance company your keys, remove your license plates and personal items from the car, and sign over the title.

• If your car was leased or financed and you have gap insurance or loan/lease payoff coverage, file a claim.

For more information, check out WalletHub’s complete guide to totaled cars.