The value of a dollar is always going to be a dollar. The value of a car, on the other hand, is a little trickier to keep track of. The fact that most buyers negotiate a sale price well below what's written on the sticker is something that complicates matters right away. Add to that depreciation, inflation, wear and tear, and it's difficult to say precisely what any car is worth when it comes time to cash in an auto insurance policy. So, how do car insurance providers decide your car's value?
Your insurer doesn't really need to worry about the ACV, or Actual Cash Value, of your car unless it is completely totaled in an accident. It's easy to figure out what it's going to cost to replace a windshield or a bumper, but the total value of the car isn't necessarily written down on a piece of paper or filed away in a computer anywhere until the time comes to figure it out.
Most of what goes into your insurer's ACV evaluation is actually considered "trade secrets." Insurers don't like to publish exactly how they figure out your car's worth. However, the following do play a role:
- Estimated wear and tear
- Previous damages
- Sale prices of similar cars in the same area
That last point is the one worth remembering. It is rare that your car insurance provider will cut you a check that covers a 1:1 replacement of your vehicle. However, if you feel that the check should be a little bigger, you can make your case by seeking out sales of the same, or a similar, make and model, and present that to your insurer.
If you want to make sure that you are fully covered, you can invest in replacement cost insurance. This will come with higher premiums, but it may be worth the cost for particularly high-value vehicles.
Value is inherently subjective. There's no real difference between a blue car and a red one, but people will gladly pay to make a car their favorite color. So, it's a good idea to temper your expectations following an accident, as you can't expect your insurer to estimate your auto at the same price that you yourself would place on it.