Vehicle Damage and 'Actual Cash Value'

After a car accident, you can get compensation for the cost of repair to your vehicle, or any other item damaged in the crash.

After a car accident, you can get compensation for the cost of repair to your vehicle, or any other item damaged in the crash. But you're only entitled to an amount up to the actual cash value of the property that was damaged or destroyed. This article discusses "actual cash value," other reimbursable costs related to vehicle damage after an accident, and what to expect in your case.

What is "Actual Cash Value"?

Actual cash value, or ACV, is another way of saying market value. It is measured by what the property could have been sold for at the time it was damaged or destroyed. It is usually substantially less than replacement value, or the cost of buying an identical new item.

If a vehicle or other piece of property is ­damaged so that the cost of repair would be greater than the property’s ACV, the property is referred to as a “total” or “total loss.” In the case of a totaled vehicle, an insurance company is ­required to pay you only the vehicle’s ACV, not the cost of repair. The same thing is true of property other than a vehicle when the repair cost would be higher than its ACV. The question of how much damaged property is worth can be a sticky one. It involves determining how much similar used property is sold for in your geographic area.

For example, let's say that Hagatha is in an accident while driving her ten-year-old car, which is in excellent running condition because she has cared for it so well. The accident has cracked the engine block, and the car requires extensive body work. Still, it can be repaired to run as well as it ran before the accident. The bill for the repairs is $5,500. However, the actual current value of a car the make and model of Hagatha’s car is only $4,000. The insurance company paying her property damage claim will pay only the $4,000 ACV for the car, not the cost of the repair. Hagatha is left to decide whether to pay the rest of the repair bill out of her own pocket—or junk the car and buy another.

Other Reimbursable Costs Related to Property Damage

Insurance should also pay for the reasonable cost of temporary replacement property. This could include a rental car or other transportation expense if your car can no longer be driven. In the case of damaged business equipment, it ­includes any property you need to use until your property is repaired or replaced.

The insurance company is also responsible for vehicle towing and storage costs. Under the collision coverage of your own insurance policy, however, the amount you can collect for towing, alternative transportation, and replacement or ­repair of the contents of the car may be limited by the terms of the policy.

To see how all of these things work in practice, let's look at an example:

After Josh was involved in an auto accident, his car was out of commission for ten days for estimates and repairs. The towing and storage bill was $140, and the cost of repairs was $2,200. He rented a car for $36 per day, using it for work and other transportation.

Also damaged in the collision was Josh’s laptop computer he bought a year ago for $1,800 and used for work. He had the computer checked out for repair, which cost $75, but it turned out the computer could not be saved. The newspaper classified ads listed a used computer of the same model and age as selling for between $1,200 and $1,300.

This is the total property damage for which Josh could be compensated by the other driver’s insurance or his own collision coverage: 

Auto towing and storage    $140

Auto repair                          $2,200

Rental car                            $360

Computer estimate              $75

Computer value (ACV)         $1250


Total                                   $4025

Caution: Watch the Deductible

If you make your claim for compensation under the collision coverage of your own auto insurance policy, the amount of your collision deductible is subtracted from the total amount you are compensated. However, there is no deductible when you make a property damage claim against the other driver in a third-party claim.

For more information on insurance coverage after a car accident, and every tip you’ll need to navigate your case, get How to Win Your Personal Injury Claim by Joseph L. Matthews (Nolo).

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