October 2, 2009

How Will An Auto Insurance Company Assess The Value Of A Car?

Auto insurance companies utilize a number of factors to determine the value of a vehicle. These combined factors determine not only the official value of the vehicle, but also the auto insurance quote given for that vehicle and the auto insurance liability required.

In any accident, auto insurance liability makes a vehicle eligible to receive any necessary repairs. However, if the car repairs are more expensive than the total value of the car (which is usually the case for highly damaged and totaled cars), the usual rules of auto insurance liability are discarded, and instead, a quote is made to determine exactly what the driver is eligible for. Most vehicle insurance companies make use of one of two methods for determining a car insurance quote. The first such method is known as cash value. Cash value involves usage of a car's value at the time it goes in for any repairs. This value is determined using a database of knowledge including factors such as original car value, car make and model, car mileage and general wear and tear. Most insurance companies rely on the Kelley Blue Book to determine the value of a vehicle. The Kelley Blue Book lists the annual value of each make and model of car. After determining the basic value of the car, the car insurance company adds to the calculated value of the car if it has extra features. This knowledge is used to determine the total depreciated value of the vehicle. The depreciated value is what any auto insurance company will use to make an auto insurance quote. This method of determining car value makes for a less expensive auto insurance quote than other methods. However, cash value quotes may prove much pricier in the event of an accident-this form of insurance could leave the driver with a low cash value and high car payments on a totaled car.

The other way to determine a car's value is to use a method called "replacement value." Replacement value simply means the cost of buying another car similar in make, model, and mileage to the original vehicle. With a replacement vehicle plan, the auto insurance company will choose a replacement vehicle based on the factors listed above. Many car owners choose replacement vehicle plans because they fear that in the event of an accident, the cash value of the crashed car would be worth a lot less than the value of any remaining car payments. However, with a replacement vehicle plan, the car owner would receive another similar vehicle and continue making the same payments on the new car.

Those who disagree with a quote and believe they are eligible for auto insurance liability may dispute the quote by presenting evidence that proves the car's true value. If the company still disagrees, a third party can be called in to make a determination.