Agreed Value vs. Actual Cash Value (2024)

FAQs

What is better, agreed value or actual cash value? ›

Agreed Value policies are particularly beneficial for owners of classic or collector cars that maintain or increase in value over time. Unlike ACV or Stated Value, the Agreed Value is a pre-determined amount that the insurer and the vehicle owner agree upon.

Like an agreed value policy, stated value policies are often used to insure classic cars, collector cars and modified cars that have a high value. The premiums tend to be slightly less expensive than agreed value insurance because your payout after a claim will vary.

Your car's ACV is negotiable.

The ACV depends on multiple factors, including the year, make, model, vehicle options, mileage, wear and tear, and accident history. If you disagree with the insurance company's estimate of your vehicle's value, you may be able to negotiate with them for a higher payout.

If it is not economically feasible to repair your vehicle, Allstate will settle your vehicle as a total loss. Your vehicle's value is based on its actual cash value, which is determined by various factors that include the vehicle's condition, prior damage and local market pricing.

While these coverages work well for newer cars, they may not make sense for older vehicles depending on your financial situation. No matter how much coverage you have, your insurer won't pay more than what your car is worth unless you add an additional replacement cost to your policy.

An actual cash value homeowners insurance policy is a great option if you're on a budget since your premium will be lower than with a replacement cost homeowners insurance policy. If you don't have many valuable items to insure, then ACV may be all you need.

ACV is used to determine how much of a payout you will receive for a totaled vehicle. It is determined by the replacement cost of your vehicle minus depreciation, which considers things like age and wear and tear.

What Is Actual Cash Value (ACV) – And Who Gets the Payment? We base your vehicle's value on its year, make, model, mileage, overall condition, and major options – minus your deductible and applicable state taxes and fees.

Which is better, replacement cost or actual cash value? ›

Actual cash value may be a more affordable option, but it may not offer sufficient coverage if your personal belongings are stolen or damaged. On the other hand, RCV increases the cost of your policy, but the payout amount you will likely receive from your insurer will be higher in the event of a covered loss.

Your insurer will calculate your vehicle's actual cash value by considering age, mileage, and condition, among other factors. If you aren't sure how your policy works, don't hesitate to ask questions or review your policy documents.

Since agreed value insurance covers the full value of the property, it's commonly used to insure an expensive, modified or classic vehicle. An agreed value policy offers extra protection, because the age and depreciation of a car won't result in a lower payout, which happens with most car insurance policies.

Though they are tax-advantaged, policy loans and withdrawals do have one major downside: The more you take out, the less your beneficiaries will receive. It's also worth noting that cash value will not build up quickly. It may take 10 years or longer before your policy is worth enough for you to reap the benefits.

Generally, market value cover can be considered best for an older car that is low in value, as you will likely need a relatively small payout to replace it with a similar car. Agreed value cover may be the better option if you're insuring a new car and want protection against financial depreciation.