How Car Insurance Companies Value Cars in a Claim

As a car owner, it’s important to understand how auto insurance companies value cars if you are involved in an accident and you file a claim. If you don’t know how it’s done, you will not be able to negotiate effectively. For instance, when your car is totaled in an accident, your auto insurance company will pay you the totaled car value which is the amount it claims the value of your totaled car to be.

​If you have been in this process before, one of the most annoying thing is getting lower estimates for your car value from your insurance company assessment than what you had anticipated.

​Car insurance valuation process

Car insurance companies use different methodologies to value cars in a claim. When your car is involved in an accident and you report the issue to your insurance company, the company will take charge and send an adjuster who will assess the damage.

When an adjuster arrives, they will assess the extent of damage so as to determine whether to classify your car as totaled or not. Auto insurance companies can also declare a car as totaled although it can be fixed but this generally happens when the cost of fixing the car goes beyond the set percentage of its value.

Most insurance companies arrive at this decision when the repair cost range from 51-80% of the car value.

If the car is finally totaled, the adjuster will then carryout an appraisal to determine the value of the vehicle. It’s important to note that during the appraisal, the adjuster does not take into account the damage experienced during the accident.

Once the appraisal is over, the auto insurance company will then enlist a third-party appraiser who will then issue their own value estimates for your car. Conducting an independent appraisal helps insurance companies and other parties involved to get satisfactory results and increase the level of transparency and honesty.

Once it’s done, the auto insurance company will compare its own appraisal and that of a third-party appraiser and use that information to make an offer to you.

What is the difference between the actual cash value and the replacement cost?
There exists a great difference between the value quoted by your insurance company and the amount it will cost to buy a suitable replacement. The insurance company uses the actual cash value when presenting an offer to you. The offer is an estimation of what the car could have costed if the accident did not happen.

When calculating the actual cash value, the insurance company takes into consideration common issues to do with the car such as depreciation, mechanical problems, mileage as well as cosmetic blemishes if there was any.

The actual cash value offered by any insurance company is usually less than the replacement cost. Replacement cost is the amount that you would incur if you were to purchase a similar car like the one which was wrecked. You can also opt for an auto insurance policy which guarantees you a replacement cost but the monthly premiums for such a cover is usually higher compared to an ordinary car insurance.

​I believe this car insurance guide has given you more insights on how vehicle valuation is done during claims. Depending on your car model and finances, you can go for the right insurance policy that will guarantee a higher value during a claim.

References;
https://www.carsdirect.com/car-insurance/how-do-they-determine-if-a-car-is-totaled
https://www.policygenius.com/auto-insurance/how-do-insurance-companies-determine-car-
value/
https://www.cooperators.ca/en/Resources/protect-what-matters/replacement-cost-vs-cash-
value.aspx
https://www.investopedia.com/articles/personal-finance/100215/how-car-insurance-companies-
value-cars.asp