Insurance companies determine the total car value, or actual cash value, using a proprietary system developed in-house that includes the factors of make, model, mileage, damage, blue book value, internal auditing and third-party auditing. Most insurance companies also rely on the National Automobile Dealers Association, which provides precise pricing guides.
An insurance company needs to determine the total value of a car in cases where the car may be totaled. In these cases, the company decides to offer an actual cash value, or ACV, instead of paying to repair the car. In most cases, the company considers the car totaled if the repairs reach 75 percent of the ACV.
The insurance company first sends a professional assessor to assess the damage. This auditor uses local prices, blue book values, make and model information, and pricing guides from the National Automobile Dealers Association to determine the true value of the car. The assessor also determines the condition of the car before any damage from the current claim. This rating, which ranges from excellent to poor, measures trim, windshield, tires, engine and even the car's interior. After the in-house assessor presents a report, the insurance company is obligated to contract a third-party assessor in order to prevent any conflicts of interest.