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How is actual cash value calculated?
I recently totaled my car, and I was worried about getting a new car until I realized I had actual cash value coverage through my insurance. How does my insurance company determine the actual cash value of my car?
Macy Fouse · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
We’re so sorry to hear about your accident, but we’re glad you had ACV coverage! It may sound complicated, but it’s actually pretty straightforward: the actual cash value is the outright price the car could sell for in its current condition.
Companies calculate the actual cash value by determining how much replacing a certain part or vehicle would cost today when taking depreciation into account.
To determine the current cost of an object (including depreciation), insurers calculate the part or car’s approximate lifetime, then decide what percentage of its lifetime is left. Your insurance company will determine how much it would cost to replace your car at its current state and age—factoring in the depreciation—then arrive at the actual cash value. This is not the cost of buying a
new replacement
.Having great
car insurance
coverage is never more important than when you’re in an accident. Make sure you’re covered in any event by using the Jerry
app. Not only does Jerry make it super easy to find affordable coverage, but Jerry will even sign you up for a new policy—potentially saving you hundreds per year on premiums. View full answer
- Gregory R.
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