Actual Cash Value Vs. Replacement Cost Value
At The Insurance Pros of Utah we're often asked, "how will the company determine the payout amount of a vehicle claim?" if my car is stolen or totaled.
All auto insurance providers cover your vehicle at Actual Cash Value, or (ACV). This means you can expect the company to bring you back to "pre-loss condition". Meaning evaluating the value of the vehicle at the time of the loss, not what you paid for it. So you need to take into consideration depreciation of the vehicle, especially if you purchased it brand new off the lot.
Example: You purchase a new car for $30,000. The car is then stolen or totaled in an accident. The insurance company will determine the actual value of the car AT THE TIME of the accident. So in this example you may only receive a payout of $24,000-$25,000 depending on the make, model and value of that particular type of car at the time.
What if you've put more money into vehicle upgrades than ACV offers? Talk to your agent for options with these upgrades and add ons. Otherwise, upgrades and add ons will not be included in an ACV payout.
What if I owe more money than the vehicle is worth? Do I need to worry about Depreciation? Again, the insurance company will only pay ACV. If you have a loan on the vehicle, be aware of any gap you might have between the ACV and the loan amount. You can either get coverage at the dealer for GAP insurance, or you can call your insurance agent to add GAP insurance on your policy. If the insurance agent can offer it, the price will be MUCH less for the coverage over the dealer.
Can I get replacement cost value (RCV) through my insurance in place of actual cash value? The majority of insurance carriers do not offer RCV on auto insurance. It is much more common with boat and RV insurance. However if you ask your agent they may be able to place you with a carrier that offers it on a limited term basis. For example, you may be able to get RCV coverage but only on a new vehicle and only during the first year of ownership, etc. Keep in mind that choosing this option will raise your monthly/annual premium.
Please call our experienced team at 435-654-6664 and we can help you make the best decision for your situation. Thank you!