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How to Calculate Actual Cash Value of Your Car

If you are raising an insurance claim, you must have heard about the term Actual Cash value. What is the reference of this term and what is its significance while processing the insurance claims? It is extremely important to have a solid understanding of this concept as it will be the actual amount that you will be liable to get from the insurance policy. Hence, if you feel like the insurer is not compensating you up to the appropriate extent and you feel like challenging the amount of compensation, you must have a solid grip on this concept as well as aware of the steps to calculate the actual cash value.

What is Actual Cash Value?

The exact terminology holds reference to car trade or to the valuation of one’s property. Typically, this term is used to refer to the value of the damaged cars for determining if the vehicle should be repaired or totaled out. By default, the new vehicles start loosing a certain percentage of its original value, the moment you start driving the car.

Insurers define this term as an alternative way to determine the present market value of a vehicle, For instance, assume, a driver is paying USD 100,000 for the vehicle and he/she drives home in the car. Then, say, after an hour, the car owner decides to dispose the vehicle and he gets a quote of USD 90,000. Thus, it comes out that even if the inherent value of the vehicle is not changing, the actual cash value has changed, just within a span of an hour’s time.

How is Actual Cash Value of Your Car Determined?

You should not assume that there is a sole way for determining the Actual cash value of your car. This approach is going to vary from one state to another, depending on the make and model of the car as well as from one insurer to another. Following are the key points that are considered for determining the ACV:

  • Accident History.
  • Aging of the car.
  • The life span expected for the car.
  • Maintenance history.
  • Mileage.
  • Cost price of the car .
  • Replacement cost of the car.
  • Specific history of the car.

Here are some of the methods that are commonly employed to determine the ACV:

  • Fair Market Value: the calculation is made on the basis of the figure that comes out of surveys. The common methods involved in this regard are shopping for quotes, considering the wholesale rates and taking a review on the comparable price.
  • Replacement cost: in instances, wherein it is not possible to employ external factors to determine the car’s fair market value, the insurers will figure the replacement cost of the car. This calculation is based on the cost of a brand new vehicle and the deduction of the amount of depreciation at standard rates.
  • Book Value: this calculation is made, based the valuation of a car for a specific year. The adjuster is going to use the car’s blue book for considering the points like the year of manufacturing, the model & make, present condition and mileage of the car to determine its book value.
  • In the majority of the instances, the adjusters are going to use some variations of these methods for determining the car’s actual cash value. To ensure perfect calculation, in the majority of these instances, the computations are made with computers that provide the actual reading.

Can You Dispute an ACV assessment?

As the methods for calculating the ACV are manifold and it takes into account various considerations, it is obvious that there will be differences in opinion about this value, between the car owners and the adjusters. So, you can encounter those instances wherein you can feel that the adjuster is not quoting the appropriate value. Fortunately, you can argue with the adjusters in those instances, if you are convinced like the value is not realistic and under the standard rates.

In those instances, it is suggested that you take either of the following ways to secure your interest:

  • You can certainly ask the adjuster to provide you a copy of the vehicle inspection report.
  • You have got every liberty to undertake an appraisal of the car independently and tally the figures between the two reports.
  • Car owners are free to produce proofs and documentation to support the upgrade of their vehicle.
  • Should you discover any flaws in the method and basis of the calculation made by the insurer, you can always point out those flaws with logical explanations.

Thus, if you even feel like the insurer is depriving you of your legal and reasonable dues, you should take necessary actions to establish your rights and claim suitable value as the average cash value for your vehicle.

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