Understanding Totaled Cars: How Insurance Companies Determine Value

A car is considered totaled when the cost to repair it exceeds a certain percentage of its actual cash value (ACV). This percentage varies by state and insurance company.

The ACV is the amount your car is worth at the time of the accident, considering factors like age, mileage, condition and market trends. ACV is not the same as the replacement cost (RC), which is what it would take to buy a new car of the same make and model. Instead, the ACV reflects the depreciated value of your car.

How Insurance Companies Determine Value

Insurance companies use several methods to determine the ACV of a totaled car. One common approach is to consult industry guides such as Kelley Blue Book or the National Automobile Dealers Association (NADA) guides. These resources provide estimates based on the car’s make, model, year, mileage and overall condition.

In addition to these guides, insurance adjusters may consider recent sales of similar vehicles in your area. This market comparison helps ensure that the ACV reflects current market conditions. Adjusters will also inspect your car to assess its condition before the accident, noting any preexisting damage that could affect its value.

Once the ACV is determined, the insurance company compares it to the estimated repair costs. If the repair costs exceed the threshold percentage of the ACV, the car is declared a total loss. At this point, the insurance company will typically offer you a settlement based on the ACV, minus your deductible.

Learn More

Contact Farrell Insurance Agency for more information about how insurers may determine your vehicle’s value after an accident.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.