Question: “What is actual Cash Value?”

Actual Value of vehicle What is the actual cash value of my car? We have all heard that as soon as you drive the car off the showroom floor, the value of the car drops, this change in value is called depreciation. The basic logic stems from the fact that people are willing to pay less for a “Used Car” or truck than they would for a brand-new vehicle.

An insurance company realizes that they can purchase a two-year-old car for less than the cost of a new one of the same Year, Make, and model, as a result their exposure is less, which is reflected in the cost of insurance. It is important to remember that the purpose of insurance is “To make you whole,” not rich. Insurance companies seek to avoid any situation where an insured is “Better-Off” because they had an accident. To do such would be to create an incentive for policyholders to want to have losses, rather than to take prudent steps to reduce losses. Carriers always depend on their customers intentionally parking in well-lit areas, locking their doors, driving with caution, generally incentivized to reduce the likelihood of a claim.

The term “Actual Cash Value” is a way for insurance companies to calculate damages at a level equal to the replacement value of damaged property, minus depreciation and the pre-determined deductible. This term applies to Commercial as well as passenger Vehicles.

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