What is Full Coverage on a Vehicle?

We were carrying full coverage on a Ford Explorer that cost $6,000. We were involved in an accident, and the insurance company declared the car a total loss. We still owe $3,200 on the car, so the insurance company agreed to pay off that amount and give us an additional $180. How is that full coverage?

Answer

Insurance companies do not go by the replacement value or Kelley Blue Book value of your vehicle when determining the worth of your vehicle. They calculate the vehicle’s actual cash value (ACV), which factors in depreciation. The actual cash value is often significantly less than the car’s replacement value. When adjusters compute your vehicle’s ACV, they might include data from local auto dealers, recent sales, and private parties in their valuation. The vehicle’s condition, equipment, and mileage are usually also taken into consideration. If you feel the insurer’s valuation of your vehicle is unfair, you can always pay for an independent appraisal to challenge the insurer’s figure.