# insurance payout for totaled vehicle: replacement value vs. cash value?
**URL:** https://boards.straightdope.com/t/insurance-payout-for-totaled-vehicle-replacement-value-vs-cash-value/765342
**Category:** Factual Questions
**Created:** [September 8, 2016, 4:59pm UTC](https://boards.straightdope.com/t/insurance-payout-for-totaled-vehicle-replacement-value-vs-cash-value/765342 "2016-09-08T16:59:46Z")
**Posts on this page:** 6
**Page:** 1
### Author:  [@Machine\_Elf](https://boards.straightdope.com/u/Machine_Elf)
#### Post date: [September 8, 2016, 4:59pm UTC](https://boards.straightdope.com/t/insurance-payout-for-totaled-vehicle-replacement-value-vs-cash-value/765342/1 "2016-09-08T16:59:46Z")
I totaled a car recently. My insurer has offered a payout that is a bit less than I expected based on my own market research. The tell me that this is because I have a “cash value” policy, as opposed to a “replacement value” policy. The have further informed me that for their purposes:
replacement value = dealer value, and
cash value = replacement value minus depreciation.
Can someone further clarify this distinction? Wouldn’t the dealer/replacement value already have depreciation figured into it?
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### Author:  [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)
#### Post date: [September 8, 2016, 6:21pm UTC](https://boards.straightdope.com/t/insurance-payout-for-totaled-vehicle-replacement-value-vs-cash-value/765342/2 "2016-09-08T18:21:40Z")
How old was your car when it was totaled?
Sounds like the insurance adjuster is a bit confused. Here’s a decent explanation from an insurance web site:
> **[Actual Cash Value Vs. Replacement Cost Auto Insurance](https://www.carchex.com/research-center/auto-insurance/actual-cash-value-vs-replacement-cost-auto-insurance/)**
>
> Actual cash value means that the insurance company pays the market value for your damaged or stolen vehicle. Replacement cost means that you are compensated for the cost of a new car. Insurance companies almost universally favor actual cash value...
> [@](#):
>
> Replacement Cost Explained
>
> If you buy a new vehicle, the value of the car drops as soon as you drive it off the lot. In fact, new cars can lose up to 11% of their value upon purchase. If the vehicle is stolen, replacement cost insurance will reimburse you for 100% of the value of a new car.
>
> This level of insurance is not included in every policy, and may not be available by all insurers. Opting for replacement cost car insurance will also increase your monthly premium.
>
> Actual Cash Value
>
> The traditional insurance definition of actual cash value is the cost of a new or similar replacement item, minus depreciation. What’s depreciation? Remember the value your car lost driving it off the lot? That’s how much a new car depreciates when it’s purchased. Nearly all vehicles (except exotic collector models) depreciate over time.
>
> Another way to look at actual cash value is to consider how much your car would have sold for in the used car market. For this reason, actual cash value is also referred to as the “fair market value.”
>
> Actual cash value is pretty much the standard level of coverage that comes with comprehensive car insurance. Like replacement cost insurance, comprehensive car insurance is optional insurance and will increase your monthly premium.
The replacement cost would be to replace your car with a new version of your car with no depreciation. The cash value would be the current fair market value of your car at the time it was totaled, which would include depreciation.
You normally can’t get replacement coverage on cars after they are a year or two years old. And if you do, your premiums are substantially higher.
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### Author:  [@Machine\_Elf](https://boards.straightdope.com/u/Machine_Elf)
#### Post date: [September 8, 2016, 6:37pm UTC](https://boards.straightdope.com/t/insurance-payout-for-totaled-vehicle-replacement-value-vs-cash-value/765342/3 "2016-09-08T18:37:56Z")
> [@Omar\_Little](#):
>
> How old was your car when it was totaled?
About 3.5 years old.
> [@Omar\_Little](#):
>
> The replacement cost would be to replace your car with a new version of your car with no depreciation. The cash value would be the current fair market value of your car at the time it was totaled, which would include depreciation.
The market research I did (kbb, NADA, Edmunds, etc.) involved searching for my exact vehicle (3.5 years old, X miles on it). Does that mean I was indeed researching the cash value, whereas replacement value would be the cost of the current model-year version of my car with 0 miles on it?
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### Author:  [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)
#### Post date: [September 8, 2016, 7:04pm UTC](https://boards.straightdope.com/t/insurance-payout-for-totaled-vehicle-replacement-value-vs-cash-value/765342/4 "2016-09-08T19:04:21Z")
> [@Machine\_Elf](#):
>
> Does that mean I was indeed researching the cash value, whereas replacement value would be the cost of the current model-year version of my car with 0 miles on it?
That’s my take on it. But it sounds like your insurance adjuster disagrees.
You can negotiate with your insurance company.
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### Author:  [@DrDeth](https://boards.straightdope.com/u/DrDeth)
#### Post date: [September 8, 2016, 9:31pm UTC](https://boards.straightdope.com/t/insurance-payout-for-totaled-vehicle-replacement-value-vs-cash-value/765342/5 "2016-09-08T21:31:30Z")
Get three listings for your car. Demand they pay out the average, settle for the lowest.
if you have a good agent, complain to him.
Adjusters often lowball their clients.
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### Author:  [@Dereknocue67](https://boards.straightdope.com/u/Dereknocue67)
#### Post date: [September 9, 2016, 8:27am UTC](https://boards.straightdope.com/t/insurance-payout-for-totaled-vehicle-replacement-value-vs-cash-value/765342/6 "2016-09-09T08:27:17Z")
Your adjuster provided a general description of cash value but it does not fit your situation. Replacement cost less depreciation is a formula adjusters use to arrive at actual cash value and is effective in most situations involving personal property when there is no market available to replace a damaged item with one just like it. A quick example would be a claim under a homeowners policy toward a 10 years old mattress/box springs. Since there is no market readily available selling used bedding, you take the price of the new items and apply depreciation based on the life expectancy of the damaged item to arrive at value.
Obviously, your situation is different because there is a used vehicle market selling a similar vehicle for X dollars. Present this info to the adjuster explaining the settlement of cash value should be the amount that places you in the same position you were in prior to the loss. Depreciation only applies if there is a betterment associated with the item used to arrive at cash value. An example involves replacing an old car with a new car, meaning you’re better off. However, replacing an older car with the same or similar older car involves no betterment and depreciation will not apply because the sale price of this older car has already factored in depreciation.
Your research (kbb, NADA, Edmunds, etc.) to arrive at cash value is correct. You can further strengthen your argument by researching the asking price of local used car dealers/individual sellers on a similar vehicle. Actual cash value is a loosely defined insurance term that in your case boils down to your out of pocket cost to replace your damaged vehicle with either an exact vehicle or one of like kind and quality.