How Do Insurance Companies Value Cars?

The “value” of your car is the amount of money that your auto insurance company agrees to pay if it’s totaled in a covered incident. Insurers assign a value to your car that is typically described as its “actual cash value,” or ACV.

What Is ACV?

ACV — or actual cash value — is the amount of money your car is currently worth. Due to depreciation, your car’s ACV will almost always be less than what you paid.

ACV is important because it determines how much your insurance provider will pay you in the event that your insurer declares your car a total loss. If the cost of repairs is higher than your car’s ACV — or a certain percentage of the ACV — the car is declared a total loss. Assuming the car was totaled under a covered claim, you’ll get reimbursed for its ACV, minus your deductible.

How do I find the ACV of my car?

To find the actual cash value (ACV) of your car, start by checking its market value using trusted tools like Kelley Blue Book, Edmunds, or NADA Guides ¹. These tools estimate how much your car is worth based on its make, model, year, mileage, condition, and location. Insurance companies also consider factors like accident history and optional features. For the most accurate ACV, gather recent sales data of similar vehicles in your area and review your insurer’s valuation report if you’ve filed a claim.

How do insurance companies value cars?

Insurance companies determine a car’s value by considering factors such as:

• Mileage
• Year
• Make
• Model
• Optional equipment
• Wear and tear
• Accident history

The companies either use their own proprietary software or third-party software to calculate the ACV based on the above factors.

Which Factors Reduce ACV?

Your car’s ACV will be lower if your car has been damaged in an accident previously, has high mileage, or has abnormal wear and tear. Learn more about the cost of car insurance after accidents.

What is stated value car insurance?

Stated value car insurance gives the car owner the right to declare the car’s worth to their insurer. This value is then used to set a maximum payout limit for that car if it is totaled. It also determines the driver’s premiums. Stated value car insurance is most often used for classic cars, and you’ll need to provide documentation proving value. However, the insurance company still has discretion in the case of a total loss, and may still choose to pay the ACV if it is less than the stated value.

Agreed Value vs. Stated Value

• Agreed value: Agreed value is often used when insuring classic cars. The insurance company and the policyholder agree on the value of the vehicle when they write the policy. That means that in the event of a total loss, the policyholder will be paid the agreed value regardless of how much the car has depreciated.
• Stated value: Stated value is also used with classic car insurance. The policyholder obtains documentation that lists the stated value of the car to the insurance company, instead of the other way around.² That being said, the policyholder may not receive the full stated amount if the car is damaged or stolen.