Updated: April 11, 2025
Advertising & Editorial Disclosure
The actual cash value of a property is calculated by subtracting depreciation from the replacement cost at the time of the loss.
Actual cash value in car insurance refers to the amount insurers would pay for should the insured vehicle be totaled. It considers mileage, make, year, model, interior, exterior and location.
Auto insurance companies consider a car 'totaled' when repair costs exceed the vehicle’s actual cash value.
Actual cash value for auto insurers is the market price of an insured vehicle and the amount they will pay if the car is totaled. Insurance companies calculate the value of a totaled car differently. That said, insurers typically use the amount the car owner paid to purchase the vehicle minus depreciation. That means the ACV of your car is less than the amount you spent when you bought it.
Insurance companies use ACV to determine how much to reimburse a policyholder if their car is totaled. To be considered totaled, a vehicle must be damaged beyond repair. Insurers consider damages to be a total loss if the cost for repair is more than the amount necessary to replace it.
Knowing what the ACV of your car is can help you determine how much car insurance you really need. If your insurance policy costs more than your car’s ACV, you might want to reconsider. You may also refer to the 10% rule. If the annual cost of your policy is more than 10% of the cash value of your car, then you may opt not to have full coverage.
The basic formula to compute the ACV of your car is to subtract depreciation from the original purchase amount. However, determining depreciation can be a bit challenging. There are actual cash value calculators for cars like Kelley Blue Book’s online tool, which can help you get an estimate.
While the specific factors considered when calculating the actual cash value of your car may vary per insurance provider, it is often affected by a combination of the below factors.
Mileage is one of the main causes of depreciation. The number of miles driven is recorded on your car’s odometer. High mileage indicates wear and tear. The more you drive, the more mileage your car will have.
ACV may vary widely depending on the make of your car. Some car makes depreciate faster than others. For instance, the average five-year depreciation rate is 33.9% for a Jeep Wrangler and 64.1% for a Nissan Leaf.
The age of a car will impact its ACV. Generally, the older the car is, the cheaper it gets. This rule does not apply to classic cars as they are treated as a special case.
Some models are more expensive than others. To get a more accurate ACV, certain features, such as the car’s color, should also be disclosed.
The ACV of a well-cared-for car may be more than a car with a dent. Even a stain can lower a car’s value.
Some places value cars more than others. There are also location-specific conditions, such as local demand, to consider.
Whether your vehicle is new or not, knowing about ACV is essential. This is especially true when you’re shopping for car insurance.
New car insurance is different from a policy for older vehicles. Insurance companies consider the car’s ACV when calculating car insurance costs. Insurers take on more risk when covering higher-value vehicles and charge higher premiums for those cars.
Actual cash value should not be confused with replacement cost. Replacement cost is when a covered car is replaced with a new one after a total loss. That's why it typically comes with more expensive premiums than ACV policies.
For instance, you have replacement cost coverage, and your car gets damaged in a covered incident. If the insurance company categorizes it as a total loss, they will pay you the cost of buying a new car.
While ACV determines the amount a policyholder may receive after a total loss, there are ways to get more than the ACV of the car. Generally, your claim amount depends on the type of policy you have. Obtaining additional coverage can help you get more out of your claim. Below are some options you can consider.
Policyholders may opt for new car replacement insurance. Your insurance provider will pay you enough to get the same make and model as your totaled car with this coverage. Your claim payout is more than your car’s ACV minus your deductible.
New car replacement insurance typically applies to newly purchased cars. So, you can only get this coverage during a certain time window after buying a new vehicle. This coverage is best for new and luxury cars.
Another coverage to note is GAP insurance or Guaranteed Asset Protection. It is a coverage option for loaned or leased cars that pays for the difference between the balance the policyholder owes and the car’s ACV.
GAP applies when the insurance claim payout is not enough to cover the balance for the amount the policyholder borrowed to finance their car. It is calculated at the time of loss.
If your car sustains significant damage in an accident and is beyond repair, your insurance provider may classify it as a total loss. This guide explored the concept of actual cash value (ACV) in car insurance and its role in the claims process. ACV, which differs from replacement cost, determines the payout amount by factoring in depreciation, thus reflecting the vehicle's market value at the time of loss.
Below are some frequently asked questions to help you better understand actual cash value and how it affects car insurance:
Actual cash value (ACV) is the term insurance companies use to refer to the current valuation of something on the market. It is the amount an insurance provider will pay after a total loss.
Auto insurance companies may calculate the value of your car differently. Typically, insurers calculate ACV by subtracting depreciation from the car’s purchase price. Factors commonly considered include the car’s mileage, make, year, model, interior and exterior. Your location can also affect your car’s ACV.
Typically, insurers pay ACV or the current market price. In some instances, your insurance policy will cover the cost of purchasing a new car of a similar make and model if you buy additional coverage. Replacement cost insurance may not be available through all insurers.
Insurance companies pay for the car’s ACV in the event of a total loss. This may be due to theft or a covered accident that led to damages beyond repair.
Overview
Because costs and even service quality can differ drastically between states, the best companies overall were decided based on which companies had the best MoneyGeek score for a particular driver profile in most states. This ensures that whether you live in Texas or Delaware, our recommendations should apply across large parts of the country.
Data Acquisition and Depth
MoneyGeek scores take into account industry-leading evaluations, such as J.D. Power, AM Best and the National Association of Insurance Commissioners (NAIC). Quotes were collected in association with Quadrant Information Services. We analyzed 83,056 quotes from 46 companies across 473 ZIP codes.
Driver Profile
MoneyGeek uses a standard profile to get average rates. The profile was modified by age, geographic location, driving history, car and coverage type, low mileage and military association to discover particular rates. The standard profile includes:
Scoring Methodology
MoneyGeek applied the following weightings to create a composite score for a maximum of five points.
Weightings were adjusted depending on the category. For instance, affordability was weighted 0% for drivers looking for the best customer service. Qualitative judgments were made when good insurance companies offered specific coverages that their competitors didn't. Liberty Mutual and Metromile did not receive MoneyGeek scores as they did not provide quote data to Quadrant Information Services.
Learn more about MoneyGeek’s car insurance methodology.
About Mark Fitzpatrick
Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.
Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!
Passionate about economics and insurance, he aims to promote transparency in financial topics and empower others to make confident money decisions.
