How do insurance companies determine car value?

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Things to Remember...
  • Car value is determined after you file a claim with your insurance company
  • Insurance companies typically use their own formulas or Kelley Blue Book to determine your car’s value
  • If you think your insurance company isn’t valuing your car correctly, you can negotiate
  • To find a better insurance policy, use a comparison tool

When you  file a claim with your auto insurance company after an accident, your insurance company will determine the approximate value of your car just prior to the accident.

This is because the insurance company needs to determine if your car can be repaired or if it is a total loss.

In general, your car can be repaired if the total repair bill minus your deductible is less than your car was worth just prior to the accident.

Your car is considered a total loss if the repair bill is higher than your car’s value.

If you are worried about the level of coverage on your car or you want to find better insurance for a lower cost, a comparison tool can help make your switch easier.

Compare car insurance rates now by using our FREE tool above!

Why Insurance Companies Need to Determine Your Car’s Value

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The only time an insurance company will determine the value of your car is when you get into a car accident and file a claim.

The goal of this process is to determine if your car can be repaired for a reasonable cost or if your car needs to be deemed a total loss.

For example, if you get into a car accident and the total cost to repair your car is $5,000, but your car is only worth $4,000, your insurance company would deem your vehicle to be a total loss.

Conversely, if your car repairs add up to $3,000 and your car is worth $4,000, your insurance company would repair your car.

  • You were in a car accident
  • You filed a claim with your car insurance company for repairs or replacement of your vehicle
  • You were not the at-fault driver

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How Car Insurance Companies Determine the Value of Your Car

Your car’s value is calculated just prior to the car accident. Your insurance company is generally obligated to repair your car to its pre-crash condition or help you get another comparable car.

Depending on your insurance company, they may average the values or give you the highest value available.

Car insurance companies can use their own formulas for determining your car’s value, or they can use a site like Kelley Blue Book or NADA to determine your car’s value.

According to Kelley Blue Book, if you currently drive a 2010 Acura MDX with 50,000 miles on it, your car is currently worth $24,263 if it is in “very good” condition.

NADA values the same car between $20,475 and $26,875.

  • Your car’s value is determined at the price it was worth just prior to the accident
  • Kelley Blue Book or NADA may be used by your insurance company
  • You can negotiate the value of your car if you are unhappy with the amount your insurance company derived

Reasons Your Insurance Company Would Not Pay for Your Car Repairs

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Under certain circumstances, you would be responsible for replacing or repairing your car out of your own budget even if you file a claim.

The number one reason for this is because you have liability insurance, and you were found to be the at-fault driver. Liability insurance only pays for the other driver and their vehicle.

While this protects you against a lawsuit, it does not repair or replace your vehicle or pay your accident-related medical expenses.

If you only have liability insurance and would like a better policy that covers you in the event you are in an accident and the at-fault driver, you can use an insurance comparison tool to quickly find numerous insurance policies.

  • You only have liability insurance
  • You were the at-fault driver
  • A comparison tool can help you find better car insurance

Car insurance companies will determine the value of your car after a car accident.

If the value of your car is more than your expected car repairs, your insurance company will repair your car to its pre-accident condition.

If your car repairs are more than the value of your car, your insurance company will give you a check for the value of your car minus any applicable deductibles or fees.

If you are concerned about whether or not your car will be repaired or replaced after an accident, an insurance comparison tool can help you find a policy that better meets your needs.

Start comparing auto insurance rates now by entering your zip code in our FREE tool below!

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