What is Actual Cash Value?

Major Car Accident
Getty Images/Steve Cole

Do you own a car? A motorcycle? How about a RV? Well, all of these modes of transportation require insurance most of the time. If you plan on protecting these vehicles against physical damage, you had better know what the term Actual Cash Value means.

When is Actual Cash Value Used?

Actual cash value is prominently talked about when it comes to home insurance, however it most definitely plays a role in car insurance too.

Anytime you have a total loss situation, more than likely your vehicle compensation will be awarded based on Actual Cash Value aka ACV. 

What Does Actual Cash Value Mean?

It means you are not going to run out and buy a brand new car! That is right, your car, motorcycle, or RV have all depreciated. You will receive the current value of your vehicle. 

Replacement Cost - Depreciation = ACV

How a total loss claim is calculated is important to understand. Frustration will surely be a big part of your claim process if you do not have a good grasp on how the process works.

Just for Recreation Vehicles: Check your policy to see if you have actual cash value or replacement cost on your awning. Awnings are very susceptible to damage. Some policies will offer replacement cost coverage at an additional cost, which is what I would recommend.

Alternate Types of Valuation

    Can Kelly Blue Book Determine ACV?

    No. Insurance carriers do not go by KBB.com or Edmunds or any other available site. Each carrier has its own proprietary system for calculating ACV total loss payouts. The good news is, that in a pinch, you can get a great ball park figure of what you are looking at value wise.

    Don't Like ACV?

    If you do not like used parts being used on your "used" car repairs, check into getting an OEM part endorsement. OEM parts come straight from the manufacturer vs used or after market parts. So in a sense, you could get original new parts for your repairs. You still will not get a brand new car in case of a total loss, but this increase in coverage makes many people very happy.

    Help with a Total Loss Accident

     

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