Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer

UPDATED: Jul 14, 2021

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In a nutshell...

  • In the past, most car insurance companies used the Kelley Blue Book as the standard for car values
  • Trade-in value is what you could expect to receive if you traded a particular vehicle in at a car dealership for another car
  • When a car is in an accident, the adjustor must determine if the car is “totaled”

Of course, your age, driving record, and where you live all affect your rate. But one thing that many people do not consider when they are shopping for car insurance is the “book value” of the car, which can have as much impact as any other factor on your cost of auto insurance.

Essentially, “book value” refers to what your car would cost to replace. However, it is not quite that simple, as there are several “book values” for each vehicle.

In the past, most car insurance companies used the Kelley Blue Book as the standard for car values. The Kelley Blue Book commonly referred to as just the “blue book,” is a publication used by banks and car insurance companies to get an average price on any given vehicle.

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What are the different value types?

Trade-in value is what you could expect to receive if you traded a particular vehicle in at a car dealership for another car.

This value is typically lower than private party value, which is what you could get if you sold your car to an individual in a private sale. Retail value is the value which you can expect to pay at a dealership to purchase that model of car.

In figuring your rates, car insurance companies use a formula that takes into consideration the value of your car. When you purchase a new vehicle, this is easy to do; the amount you paid for the car is, at least theoretically, its value for insurance purposes.

However, vehicles depreciate in value each year, so a used car will have to be valued for purposes of figuring insurance rates.

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How do car insurance companies determine value after a car accident?

When a car is in an accident, the adjuster must determine if the car is “totaled.” This means that the vehicle is so severely damaged it cannot be repaired and must be replaced.

At this point, book value can become very important, depending on the type of coverage you have. If your policy states that actual cash value is to be paid, you will receive only what the car was worth when it was wrecked.

If you purchased replacement cost coverage, you will receive enough to replace your vehicle. Most policies do not replace vehicles, but only offer the actual value of the vehicle.

Because the book value is only a guideline and is used for making loans more often than determining payout value for totaled vehicles, insurance adjustors have begun using a new system called CCC Information Systems.

CCC’s system compares the value of recently totaled vehicles in a geographical area to arrive at a fair settlement amount if your car is declared a total loss after an accident.

This is usually to the advantage of the insured person, as your car will be valued on a more realistic scale than if only book value is used.

Can you dispute the value a car insurance company claims your vehicle to be worth?

Many victims of car accidents are not satisfied with an adjustor’s price when the insurance company makes a settlement offer. However, many insured persons are unaware that they do not have to simply accept the adjustor’s price for the value of the car.

Using book value and other tools, you are free to counter-offer with the insurance company by showing that you believe you should be given more money than the company is offering.

If you are having trouble understanding blue book value, the Kelley Blue Book website, www.kbb.com, is user-friendly and easy to understand.

You can get free car valuations for your area by entering your make, model, year, and any extra features of your car.

If you are ever negotiating with an adjustor for settlement, this is a good way to determine if you are being offered a fair price for your car. You can also use this information if you decide to sell your car or trade it in.

Finally, the book value is useful to know if you are shopping for a used car, and can help you determine which car will carry a higher insurance rate by comparing the relative values.

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