How to Determine Insured Value for Your Vehicle

What is the difference between actual cash value and agreed value when it comes to your vehicle insurance?

When you place insurance on a vehicle (auto, boat, motorcycle,RV) the issuing insurance company is agreeing to replace the vehicle, in the event of a total loss, at the current value of the vehicle. Say you own a 2002 Honda Accord EX that you purchased new. You are the original owner and have taken good care of the vehicle through regular maintenance, proper tire rotations, kept the miles low, etc. and then you are in an accident that totals the vehicle. The responsible insurance company will offer you what the current value of the vehicle is based on Kelly Blue Book and NADA value, not what it cost to buy a new 2009 Honda Accord EX. You didn't own a 2009 vehicle so why should replace a 7 year old vehicle with a brand new one? You are buying an Actual Cash Value insurance policy.

What if you own a '32 Ford Roadster that you've spent the past 4 years restoring and rebuilding it into your dream car? It turns heads and wins trophies at the car shows. Your neighbors ask you about what it took to get it into such good condition. You take it out only on special occasions. Your wife is jealous. Do you want it insured for Actual Cash Vale? Of course not!

You want an insurance policy that will pay you today's value of your blood, sweat and tears poured into that car. You want an Agreed Value or Stated Value insurance policy. If the vehicle is totally damaged you want the current dollar amount of all that work.

How do you determine the dollar value? The insurance company will agree to give you the appraised value of your cherry 32' Ford Roadster. They will base the premium on the value you agree on (up to the appraised value), how many miles you place on the car annually, and where the car is garaged or kept on a regular basis. Some companies, like Grundy and Hagerty, specialize in these unique insurance policies.

Motorcycles are treated a bit different because of the various accessories bikers like to add to their rides. This includes saddle bags, exhaust pipes, rims, seats and backrests. Custom paint jobs are considered modifications which require receipts to justify the value paid by the insurance company.

If your vehicle is 0-5 years old, some companies offer a "new car" replacement option. This states that if the vehicle in purchased new and is totaled within the first five years of ownership, you can receive the dollar amount needed to purchase a new year model of the same vehicle. This options usually requires an additional premium that needs to weighed against the value of the car to determine it's true value. This feature is a common option on RV policies through Foremost, GMAC Insurance, and American Modern.

So, before you take that Hot Rod out for it's maiden trip to the car show, make sure you have the right insurance policy insuring the right value.

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