How do insurance companies determine a totaled vehicle's value?

"Do they use trade-in value or actual cash value? Would it matter if I have replacement cost coverage on my policy?"

“When a vehicle is deemed a total loss with an insurance company, they often use actual cash value to determine the vehicle’s value. Actual cash value is the cost of the vehicle minus depreciation.
Every vehicle depreciates over time. The newer your vehicle is, the higher its depreciation will be. Car insurance companies pay out based on this as you are never supposed to benefit financially from an insurance transaction.
The only time that this may differ is if you have new car replacement coverage on your vehicle. With this, your insurance company will pay to replace your vehicle with a comparable car. The purpose of replacement cost coverage is to ensure you aren’t losing value on your vehicle if totaled.
Some insurance carriers also offer additional coverage that adds 20% to the actual cash value of your vehicle if totaled.”
Emily Maracle
Answered on Jul 27, 2021
Emily Maracle is a car insurance specialist living in New York. Originally from the Pacific Northwest, she has a degree in English Literature and a background in customer service. She enjoys cooking, gardening, and living sustainably. In the future, she can't wait to upgrade to a hybrid or electric car.

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