In car insurance there is no such term as loss value reimbursement; however, there are some laymen who refer to loss value reimbursement as the value assigned to their vehicles when it is deemed a total loss after an accident. In this case, it is the car insurance company that determines the value of the vehicle when this occurs.

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When you buy car insurance, your vehicle is assigned a value based on the make and model of your vehicle as well as the mileage that is on your vehicle. You also have to provide your VIN because the insurance company will check to see if your vehicle has even been in an accident.

If your vehicle has been in an accident, the total loss value is reduced. The amount of the reduction will depend on the car insurance company you use but will usually be based on what the car would be able to sell for if you took it to a used car dealer.

What is actual cash value reimbursement?

Most of us who purchase collision and comprehensive coverage on our cars are doing so on actual cash value basis. Simply put, this means the insurance company will reimburse a driver whose car is totaled at whatever amount is needed to replace the vehicle with another one of similar year, make, and model.

Actual cash value relies heavily on the Kelly Blue Book, NADA dealer prices, and the average price of similar vehicles in your local area. It is very much a subjective calculation which often leaves drivers feeling as though they have not received what is due them.

Although actual cash value coverage is less expensive than replacement value, it does come with the knowledge that you will not always get what you think is fair reimbursement. Nowhere is this more apparent than when you purchase a new car. That new vehicle loses value the moment you pull off the lot, regardless of the fact that you have a fresh car loan staring you in the face. In fact, the newer your car loan is, the more important is for you to avoid accidents at all costs.

What is replacement value reimbursement?

Replacement value reimbursement covers the value of your car in an amount that it would cost to fully repair or replace it with an identical vehicle. To make this easier to understand think of a hot rod that has been customized with high performance parts.

With an actual cash value policy, an insurance company would not take into consideration all of the money spent on high performance parts. You would simply get your car repaired or replaced at the value of an unmodified similar make and model. With a replacement value policy all of those extra parts are covered.

This type of policy is a little more complicated because it requires you and your insurance company to reach some sort of agreement as to the value of your car. If you plan to use this type of insurance it is vitally important that you save all receipts for customized and high-performance parts. They are your only record to prove the value of your vehicle to the insurance company.

The insurance company also will most likely want to take pictures and have your vehicle appraised before writing the policy.

When is the total loss value assigned to my vehicle?

When you apply for insurance, the insurance company assigns the loss value when they provide you with your quote. Your total premiums will include a premium based on how much the insurance company believes that it will have to pay if your vehicle is totaled in an auto accident.

Sometimes the loss value will change after you have paid for your insurance. That is because some companies will provide you with a quote without first checking your VIN. Once they run an accident report, if there is a report of an accident that required repairs on your vehicle, the total loss value will be reassessed.

This is really the diminished value for a vehicle. The value of a vehicle is diminished because after an accident the vehicle doesn’t have as high of a value on the open market. Assigning a diminished value isn’t legal in every state, so you may not be affected by this process.

If you are, however, you do have the right to negotiate with the insurance company over the value that they assign to your vehicle. If you used all factory direct parts, for example, to repair your vehicle and the vehicle was repaired by a mechanic who is certified by the company that makes the car, you may be able to have the diminished value increased so your car is deemed more valuable.

When does the insurance company tell me about my total loss value?

The thing is, the insurance company doesn’t have to tell you the value they assign your vehicle when you get car insurance. What’s more, as your vehicle ages, this value will change, although this only occurs each time you renew your car insurance. You have the right to ask what the assigned total loss value is, but the insurance company doesn’t have to tell you.

If you are insuring a high priced vehicle with a niche company, then typically the total loss value is actually written in the policy. In many cases the insurance company doesn’t pay close to the total value of the vehicle if you were to have a total loss accident. It is important to negotiate this with the insurance company and get the most for your car that you can.

Do I have to have loss value reimbursement coverage?

As a matter of course, states don’t mandate minimum amounts of loss value reimbursement in terms of collision or comprehensive coverage. Some states will require drivers to cover their bank’s investment, either through insurance or out of pocket. And in states that don’t, banks will often require collision and comprehensive coverage as one of the terms of approving the loan.

This is solely due to their need to protect their investment. If you were to total your car, the only way that they can recover the money they loaned you is through your insurance policy.

It’s important to note that banks that have this requirement also have their own insurance policies that will kick in if you let your coverage lapse or choose not to carry it. But be warned, their policies are significantly more expensive than what you could get through your own insurance provider.

This is done with purpose. By making it more expensive for drivers to use the bank insurance, they are encouraged to abide by the terms of the loan agreement and seek their own collision and comprehensive coverage.

How can I choose the insurance company that assigns the most value to my car?

While getting a free quote is the best way to start this process, it is going to require a bit more legwork than that if you want to ensure that you are getting the most money for your vehicle.

If your car has never been in an accident and you don’t have an outrageously priced vehicle, then most insurance companies are going to value your vehicle at market value. However, if you have had an accident and your vehicle has been repaired, then the value may change a bit between companies.

Before you sign with an insurance company, speak with an agent and ask what total loss value they are assigning to your vehicle. You can compare this amount with the Kelly Blue Book value to see if they are in the ballpark for a vehicle in your condition. If not, then negotiate or find another company to work with.

The good news is that there are dozens of insurance companies for most people to choose from, so don’t settle for anything less that what you think you deserve.

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