How Do Insurance Companies Determine Actual Cash Value

How Do Insurance Companies Determine Actual Cash Value – Policies pay different amounts to repair or replace property (your home and personal belongings). Usually, you will have to pay part of the cost yourself. That amount is known as deductible amount. After that, it depends on how much money you get from the insurance company if the coverages you buy pay “replacement cost value” (RCV) or “actual cash value” (ACV).

ACV is the amount that would replace or repair your home and personal belongings, less depreciation. Depreciation is a decrease in value based on things like age or wear and tear.

How Do Insurance Companies Determine Actual Cash Value

Even if you have purchased coverages that pay RCV, some types of property can only be paid at ACV. These may include:

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*️⃣  Most companies will pay you only part of the RCV first. You must prove that you have repaired your home or replaced or repaired personal items before you can get the rest of the money.

Deductible – If you have a claim, the deductible amount is deducted from your claim payment. This can be found on the Declarations page of your policy.

Policy – ​​The contract between you and the insurance company. The policy states what is covered and what the insurance company will pay.

Third-party claim – A claim you file against another person’s insurance policy or a claim filed by someone against your policy. In response to the COVID-19 pandemic, Andreotis Law Firm is practicing social distancing and taking all precautions to keep our clients and staff safe. To meet our client’s needs, we are providing meetings and consultations through phone or video conference. Contact us to set up your free consultation.

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When you are involved in a bad accident, sometimes the damage to your car is so extensive that your insurance company considers it a “total loss” after the initial vehicle inspection. What this basically means is that the damage is determined to be so severe that it is not worth repairing your vehicle instead of “totaling it” and paying for the total loss of your car.

The determination of whether or not your car is a total loss after an accident varies from state to state and from insurance company to insurance company. However, the general rule that applies is that if the damage exceeds a certain percentage of the car’s value it is usually characterized as a “total loss” and cannot be repaired. These percentages vary from state to state but the average percentage is between 50% and 70%.

After a crash that results in any amount of property damage, the insurance companies involved perform a total loss assessment, often called a claim or insurance adjustment. Whether or not a vehicle is declared a total loss is determined by state law.

Florida uses the Total Loss Threshold (TLT) to calculate whether a vehicle is a total loss after an accident. Total Loss Threshold or TLT is the legal limit at which an insurer must declare a motor vehicle as total and obtain a protection certificate of title or certificate of destruction.

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Florida’s total loss limit is 80 percent. This means that if the damage to repair your vehicle exceeds 80% of the actual cash value of your vehicle, it is considered a total loss.

For example, if your vehicle was worth $10,000.00 before the accident and as a result of the collision, your vehicle will be considered a total loss and the damage will cost $8,000.00 or more to repair and you will be compensated. For a “total loss” of your vehicle as opposed to repairing damages.

About half of the states have a different method called the Total Loss Formula (TLF). This formula combines the cost of repairs with the cost of salvaging the vehicle, and when these figures exceed the actual cash value at the time of the accident, the car is determined as a total loss.

Below is a list of all states and whether they use the total loss cap or the total loss formula. The table also provides the percentage each state uses if the total loss threshold is used to determine if a vehicle is a “total loss.”

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NADA is one of the methods used to calculate the replacement cost of your vehicle in the event of an accident. It uses comparable vehicles, make, model and qualities, like your own, to determine the value of your car before the crash. This is a good tool to determine if the offer made to you by the insurance company is fair or out of line.

Kelly Blue Book is a commonly used online tool to evaluate the fair market value of your car at the time of an accident. You can put in the specific characteristics of your vehicle and find a number of replacement vehicles of the same make, model and standard as yours in your area.

This tool is often used to gauge whether the figure given to you by the insurance company as an offer for your vehicle is fair or not and is also used in negotiations to increase the offer given to you.

The Kelly Blue Book is proof of what your vehicle can be bought for in your area and is often used for the replacement value of your car when valuing it after a “total loss”.

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Actual cash value is the value of the car in your exact condition, or immediately similar at the time of the accident. It is often difficult to calculate but the most commonly used factors in actual cash value are mileage, condition, wear and tear, upgrades done by the owner and maintenance performed to keep the car in service.

Things to help you determine true cash value include receipts for parts and repairs, pre-accident photos, and accurate service records.

When determining the true cash value of your car, it’s helpful to think of the process as similar to a real estate agent determining the value of a property or home. Real estate agents select comparable homes in the area that have similar characteristics to the home, and those comparisons are used in the determination of the home in question. The same process is used in the valuation of your vehicle when determining compensation for loss.

Have you upgraded the rims, stereo, engine, etc.? If so, provide receipts for the work you have done and these will be considered in the valuation of your car.

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Oil changes, tune-ups, new tires, brakes, etc. are considered in your car valuation. Hopefully, you’ve saved all the receipts so you can easily determine what counts toward your car’s value.

If you haven’t saved receipts, you’ll need to provide other evidence to show that you did, in fact, do the work or upgrades you’re claiming.

If someone else has done work on your vehicles, you can go and ask for receipts and proof that the work was actually done and the cost of said work.

You will need to provide some credible evidence that upgrades or work has actually been done to your vehicle to be considered in your car appraisal.

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You have the opportunity to get your personal effects and license plate from your car. Your vehicle will be stored at a salvage yard.

You will be required to hand over your vehicle keys in lieu of a cheque. You must give up everything that belongs to your vehicle because you are giving up all rights to it in exchange for a total loss check.

Instead of a cheque, you need to sign over your vehicle title. As mentioned earlier, you will have to give up all rights to the vehicle in exchange for a check for its total loss.

After accepting the final offer for your vehicle, signing over the vehicle title and giving the keys to the insurance company you will be issued a check for the agreed amount and a property damage release will be required to be signed as all property damage issues are settled and final.

Replacement Cost Value(rcv) Vs. Actual Cash Value(acv)

If you were not at fault for your accident, the adverse party who caused the accident will be liable for the damage to your vehicle and the injuries caused to you and all passengers in your car.

If the adverse driver or the owner of the vehicle they were driving, if it is another person, has insurance, their insurance company/s will be responsible for the damage/total loss of your vehicle.

As mentioned above, if the adverse driver or vehicle owner does not have enough property damage coverage to cover the total loss of your vehicle than your insurance, assuming you have coverage, makes the difference.

A coverage issue often arises when an at-fault driver is involved in an incident that damages multiple vehicles and does not have enough coverage to repair or replace all the cars involved. Generally, people

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