Month: March 2025

As a car owner or a prospective car owner, there are some information you should have already. One of such is to know how best you can benefit from insurance companies. For non-insurance experts, the jargon that insurers use when discussing business might be hard to understand. To get the best deal from them, you must be able to at least understand if not speak their language. Explained below are some of the terms regarding car value for insurance claims Connecticut.

The Different Types of Car Value
Insurance companies have different methods of valuing a vehicle. The valuation method depends on the type of insurance policy that the client chooses.

Actual Cash Value (ACV) Or Fair Market Value (FMV)

These terms denote the actual worth of a car at any given time after accounting for its depreciation. It is the price that an interested buyer will be willing to pay for your vehicle given its conditions at any given time. In the event of a total loss, this valuation method provides policyholders with an amount that is equal to the worth of his car right before the loss.

These valuation methods do not provide clients with enough to replace their car in the event of a total loss as new cars are known to depreciate rapidly once driven off the lot.

Replacement Cash Value (RCV)

This is the cost it would take to replace a car at any given time according to its current worth. Thus, in the event of a total loss, a client that used this method to determine his car value for insurance claims Connecticut would be paid enough money to buy the same type of car he lost on the current market.

Agreed Value
This sort of valuation method can be likened to an agreement reached between the insured and the insurer on what the car is worth. Thus, in the event of a total loss, the insurer must pay the insured the total agreed amount. This is a special type of valuation method that is used by clients who wish to insure their car for an amount that is either above or below the current market value. It is mostly used by people who want to insure a classic or a custom car.

It is important to note that this valuation method isn’t open to every car owner. Your car must meet a certain requirement before this policy is given out.

Diminished Value
This value comes into play in the event of an accident where there was no total loss. An accident automatically decreases the value of your car on the market. This decrease in value is maintained even if the car’s restored to perfect conditions after repairs. If the accident is a result of the negligent act of another road user, you can file for diminished value claims with the insurance company of the at-fault party.

Salvage Value
Sometimes you might decide to still keep your car even after it has been declared a total loss. At this point, the insurance agency must determine the salvage value of the car and subtract it from the total money that would be paid out to you in compensation for your loss.

The salvage value is the price that an insurance agency would have sold the car for. In most cases, they sell to junkyards.

For some car owners, the first time they hear the terms market value and agreed value car insurance is when purchasing an insurance policy. Not fully understanding what each option means and what they offer, they might make a less than optimal choice. So here are a few facts about both insurance policies.

What Is Market Value Car Insurance?
This is an insurance policy that takes into account the current market value of the car at any given time. It means, in the event of a total loss, the insurance agency would pay to the insured an amount equal to what his car was worth on the market right before the loss.

What Is Agreed Value Car Insurance?
As the term implies, this sort of insurance is like an agreement between the insurer and the insured on the cars’ worth. Thus, when there is a total loss, the insured would get the full amount that has priorly been agreed upon.

The Pros and Cons
Market Value Car Insurance
Pros

*It’s cheaper

*There’s no fear that you are paying excessively

*Your premiums are automatically updated as market value changes. This makes it convenient

Cons

*The payout on a claim could be far lower than that of an agreed value coverage

*The market value of your vehicle at the time of a loss may be far below your expectations

*Even with optimal maintenance, your car might still be undervalued on the market

Agreed Value Car Insurance
Pros

*In the event of a total loss, you know exactly what you are getting

*You can insure your car for less than its market value. This helps you save money.

*If it wasn’t a total loss, there will be enough to cover for any damages that the car would have suffered.

Cons

*Depending on how high you go, the premiums on this policy are costly.

*Not every car qualifies for this type of policy.

*It requires some sort of valuation.

Which Policy Is Best for You?
Having considered what agreed and market value car insurance means and their differences, you might know which one is best for you. If you are still a little confused though, consider these:

The cost of buying the car: if your car was very expensive when you bought it then you should spring for an agreed value policy. Chances are that the current fair market value would not be so fair on the car because of depreciation and other factors.

If your car is also a custom-built car or a classic car, then an agreed value insurance policy is the best bet. For such cars, the usual market value insurance does not provide enough coverage. In the event of a loss, you might find that what the insurer pays you isn’t even up to half of the damages you incur.

Market value insurance on the other hand comes in handy if you need to save money on insurance. Agreed value could also work for this as you can insure your car for an amount lesser than the market value.

If you are also looking to get a new car soon, then the market value option is probably best for you.