How Car Insurers Evaluate Cars – Understanding the Process

All car insurance companies take into consideration several factors when evaluating the cost of your car when it has been involved in an accident or totaled. Normally, they value our car much lower than we would have ever imagined, but how can we understand these factors in laymen’s terms?

In this article, we will discuss how your insurance company evaluates your car when it has been in an accident and how the make, model, year and your driving history will directly affect your insurance premiums and comprehensive car insurance quotes.

What is Actual Cash Value (ACV)?

Actual Cash Value (ACV) is the value your insurance company considers the actual value of the car before the accident. The adjuster will take into consideration the following:

• Wear and tear
• Depreciation
• Any previous mechanical issues or problems
• Cosmetic blemishes such as soda stains or scratches
• Mileage on the odometer

Even if you were driving a brand new car only a day old, its ACV might be 20% less than you paid for it. The more damage or wear and tear your car had before the accident, will mean more deductions from the insurance company for your ACV.

The insurance company will hire a third-party adjuster to give a second appraisal on the ACV. When your insurer makes the offer to you, they will take into consideration the two appraisals.

All insurance companies and adjusters have a manual that has a set price for all types of vehicles on the market, according to the year of the vehicle. Then, they will make stiff deductions for any type of wear and tear.

Actual Cash Value vs. Replacement Cost Insurance

Actual Cost Value is the cost they consider your car might have been sold for at a reasonable price, if it was not in an accident. The ACV will be considerably lower than the cost of the same car on the market and your new car will be a huge step down from your old one, unless you are willing to spill out some big bucks from your own pocket for a better car.

Replacement Cost is the exact cost of purchasing a new vehicle similar to the one you crashed. The insurance premiums for this type of policy are quite hefty when compared to ACV policies. It is highly recommended to invest in replacement cost policies if you have a longtime loan on your car, as you will be able to get the same vehicle without having to pay extra.

Can you negotiate the Actual Cash Value of your car?

This depends. Before you accept their settlement and sign the papers at the insurance company, investigate by doing some comparison car shopping. You can visit some of the local used car dealerships and request a written estimate for vehicles that are similar to yours.

Another good habit is to keep all of your maintenance receipts for your vehicle in a safe place; this will prove to the insurance company that your vehicle was in good condition and working order.

What factors affect your insurance premiums?

Many people believe that having a bright red vehicle will mean having higher insurance premiums. Is that true? Actually, it can’t be further from the truth. The color of your car has no affect on your car’s cost of insurance. But, what factors do the insurance companies use to determine the cost of your monthly rates?

1. Your driving habits: If you have a safe driving record with no traffic violations or accidents in the past three years, your monthly rate will be lower.

2. Your age: The chances of someone under the age of 25 having a car accident are considerably greater when compared with an older person. Since there is a higher risk with young adults, they will have to pay top price on their insurance premiums.

3. The vehicle type: A 2017 truck will have considerably lower insurance premiums when compared with a 2017 sports car. Insurance companies base their insurance costs on the risk factor and a sports car is a bigger risk over a truck, therefore the higher fees.

4. The car’s value: The more expensive the car, the more costly your insurance premiums. The reason for this is that expensive cars are more expensive to repair.

These are just some of the factors which insurance companies take into consideration when deciding the rate of your insurance premiums. Other factors that affect the price of your insurance are the safety ratings for your model. The more safety car crash tests it has successfully passed, the cheaper the insurance premiums are.

Car insurance companies are experts on making money and keeping it. When choosing an insurance plan, make sure you are getting the most coverage for your buck. Also, it pays in the long run to drive safe and to practice safe driving habits, as it will mean lower insurance premiums in the future. Now that you understand how car insurance rates work, it’s time to plan that epic road trip!

Katrina Manning
Katrina Manning
[email protected]

English-speaking technical and web writer/editor with over eight years’ experience penning content for a wide variety of sites and publications.

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