If you’re not familiar with the term “actual cash value” and how it’s used in auto insurance, this is a good time to learn. In this post, we discuss actual cash value and provide you with some useful tips to keep in mind as you shop around for auto insurance.
What Is Actual Cash Value in Auto Insurance?
Actual cash value insurance (or ACV) is a type of insurance coverage that pays the amount it takes to replace your damaged or stolen car, minus depreciation at the time of the loss.
Now let’s take a look at what this all means for you.
A good place to start is to understand what “depreciation” means. Remember the old saying that goes “your car loses value the minute you drive off the lot”?
Well, that’s what depreciation is: the term refers to how your car loses value over time.
Now, if cars become less valuable over time, that means that your vehicle is worth less today than when you bought it. Actual cash value takes this basic principle into consideration when it’s time to pay you to replace or repair your car.
How Does Actual Cash Value Auto Insurance Work?
When you file an actual cash value auto insurance claim, the insurance company will need to know how much your car is worth factoring in variables such as:
- Wear and tear
- Your vehicle’s age
- Vehicle options
It’s worth noting that in most cases, insurance carriers rely on third-party companies to perform ACV assessments.
The alternative to actual cash value is replacement cost value (RCV). With RCV, the insurance company pays the full cost of repairing or replacing your vehicle without accounting for depreciation.
As you might expect, RCV policies are more expensive than ACV policies, a fact you should consider when purchasing auto insurance.
If you need help making sense of the different types of auto insurance policies or just want to build a policy tailored to your needs, be sure to contact our experts at RF1 Insurance Services. We’ll answer all your questions and offer the assistance you need to make an informed decision.
RF1 Insurance Services: Auto Insurance in Southern California
Looking for dependable and affordable auto insurance? At RF1 Insurance, we work with some of the world’s most trusted insurance companies, including Safeco, Guard, Stillwater, National General Premier, Aegis, and the California FAIR Plan.