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What does actual cash value mean?
I’m picking out car insurance for the first time, and I’m not sure whether I need actual cash value coverage. What is actual cash value anyways?
Macy Fouse · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
The ins and outs of car insurance can definitely be confusing!
Actual cash value
is exactly what it sounds like: it’s the actual price your car is worth in its current state and age. The actual cash value is important when your insurance company is determining how much to pay out when your car is totaled. The actual cash value is not the same as the actual value. While the actual value is the flat amount the car would cost before depreciation, the actual cash value takes depreciation and wear-and-tear into account.
For example, a 2011 Mazda 6’s actual value is about $21,000, but a 2011 Mazda 6 with 115,000 miles, a couple of dents and scratches, and a worn-out fan belt won’t have that same value. The actual cash value would be $21,000 minus the depreciation all of those factors amount to.
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