Agreed Value vs. Stated Value: How is the Value of a Loss Determined Under your Car Insurance Policy?

By Desiree Baughman
Desiree maintains insurance licensure in 46 states, and by combining years of experience as a writer and insurance professional, she delivers information consumers can easily relate to and understand. A graduate of Sweet Briar College with a diverse writing portfolio, she regularly serves as an expert source and commentator for respected outlets like CBS Money, Bankrate, and Ragan.com.

Agreed Value vs. Stated Value: How is the Value of a Loss Determined Under your Car Insurance Policy?

How does a car insurance company determine what a claim is worth in the event that your car is totaled? In general it depends on the value of what was damaged/lost. But how is value decided? This article will help you understand three systems of valuation used to settle car insurance claims: actual cash value, agreed value, and stated value.

Actual Cash Value (ACV) Car Insurance

“Actual cash value” (ACV) refers to what your car was worth the second before it became a total loss. For this type of valuation, a claims adjuster will head out to the tow yard or ask you to bring the vehicle in for an inspection. When it comes to ACV valuations, keep the following in mind:

  • The adjuster can use a source of their choosing to determine the ‘actual’ value of your car.
  • If you disagree with the determination of your vehicle’s ACV, you better have the evidence to back it up. It’s possible to push back on the insurer’s decision, but nothing in your ACV policy requires an adjuster to change their valuation based on your evidence.
  • If you simply can’t agree with the insurer’s valuation, in the end you may have to hire an attorney and fight back in earnest. That can get expensive. But remember the insurer doesn’t want to head to court any more than you do.

Agreed Value Car Insurance

Under ACV, an adjuster has to retrospectively determine the value of your car after it has already been damaged. Under an “agreed value” car insurance policy, you and the insurer will come to an agreement on your vehicle’s value before you sign your policy and buy the insurance. If you need to file a claim later, you can rest assured that the insurance company won’t lowball the valuation and leave you holding the bag (which is always a risk with ACV insurance). How do you know if you have agreed value insurance? Don’t take an insurance agent’s word for it–read the policy. Many shudder at the thought of studying insurance documents, but it’s the only way to find out where you stand. Check your policy for language like the following: “In the event of a theft or total loss of your vehicle we will pay the Agreed Value.” And remember that when you see words like “Agreed Value” capitalized in a policy provision, it usually means the term is defined somewhere else in the document. Look it up to learn exactly what is meant by agreed value.

Stated Value Car Insurance

Stated value car insurance is often confused with agreed value insurance, but they are very different. As pointed out above, an agreed value policy promises to pay the agreed-upon value for your vehicle in the event of a total loss. Stated value policies will pay out the “stated value” or the ACV, whichever is less. So if the insurance company has this escape clause allowing them to fall back on ACV, why would anyone want a stated value policy? It’s actually offered as a way to pay lower premiums to insure a vehicle for less than it’s actually worth. Stated value policies are often marketed to collector and antique car owners, but is stated value really the best choice?

Valuation and Specialty Vehicles

If you own a classic, antique, or collector car, you probably already know that insuring it isn’t as simple as comparing quotes online and signing up. While it’s possible to get a fair ACV settlement, most owners of collector vehicles shudder at the thought of a claims adjuster who looks at Honda Civics all week trying to accurately appraise their investment. And while stated value may sound like the villain of specialty car insurance options, it can still work to the advantage of some car owners. For example, let’s say you inherit a collector car worth $300,000, but you don’t want to pay the premiums associated with an agreed value policy for such a valuable ride. With a stated value policy you can ‘state’ the car’s value as $200,000 and pay lower premiums based on that artificially-limited valuation. If the car is totaled, the insurance company would pay the lower of $200,000 or ACV. Stated value policies give specialty car owners an opportunity to insure part of their investment, making it a potentially attractive middle ground between ACV and agreed value.

Some car insurance experts argue that a stated value policy is never the best choice. They recommend opting instead for an agreed value policy with a lower agreed valuation in order to keep premiums down.

Consider a Specialty Car Insurance Company for your Collector Car

In general, specialized classic car insurance companies will be able to offer you far greater coverage at a lower premium than the better-known personal and commercial auto insurance companies.  Many specialty policies include unique options such as roadside assistance with guaranteed flatbed towing, the ability to select your own repair shop, and coverage for any spare parts and tools necessary to bring your car up to speed. And perhaps most important of all, their adjusters know collector cars. Too often, adjusters who process claims under ACV policies simply don’t know any more about specialty vehicles than the Average Joe, and therefore aren’t equipped with the valuation and assessment tools needed to accurately compensate you for your loss.