Actual Cash Value - Auto Insurance

What is an Actual Cash Value in Car Insurance?

<lingo>An automobile's actual cash value (ACV) is the market value of a vehicle at the time a claim is submitted. It is frequently used in a situation when the automobile is determined to be a total loss or “totaled”. The actual cash value is different, and usually far less than the replacement value. This is a critical difference in automobile insurance that drivers should be aware of. Actual cash value will consider factors like how many miles are on the vehicle, its age and the condition of the vehicle beyond normal wear and tear.</lingo>

Actual Cash Value Clearly and Briefly Explained

When a vehicle has collision coverage using actual cash value for replacement, the insurance proceeds may not cover the cost of getting a vehicle of similar value. A policyholder could be left short of being able to replace their damaged vehicle. This is because ACV takes into consideration mileage and condition which is likely negatively affected the longer a vehicle is owned. Insurance companies will frequently use Kelly Blue Book (KBB) or similar values in determining actual cash value. Some policies may even include further reductions like ACV -200. This means in the event of a total loss the insured will be paid the actual cash value minus $200. 

<twitter>Insurance companies will frequently use Kelly Blue Book (KBB) or similar values in determining actual cash value.</twitter>

ACV can be negotiated with an insurance company if the insured can demonstrate the vehicle's worth through other local pricing or improvements made to the vehicle. Those concerned about coverage that will be sufficient to replace their current vehicle in the event of a total loss should explore policies with replacement value or secure gap coverage if a car is leased.

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