How do insurance companies figure out the value of a car?

Written by stephen hicks
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How do insurance companies figure out the value of a car?
An auto adjuster will inspect your vehicle to help determine its value. (Hemera Technologies/ Images)

Many people have strong emotional attachments to their vehicles, and it can be a difficult experience for you to have your insurer total your car after an accident. Once you accept that the vehicle is a total loss, your concern will probably be receiving a fair settlement of its value. When you understand the insurer's process, you can best judge whether the settlement is fair.

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Initial estimate

Whether your vehicle is repairable or a total loss, an adjuster will inspect the damage and write a repair estimate to determine approximately how much it would cost to restore it to its pre-loss condition. If the repair cost is too high, the adjuster will also perform a total loss evaluation to determine its value. The estimating software the adjuster uses has a database of approximate vehicle values to alert the adjuster when the repair estimate approaches the total loss threshold.

Visual inspection

The total loss evaluation begins with the adjuster's visual inspection. They will note all the options your vehicle has in the total loss report, as well as the odometer reading. Then they will inspect all aspects of your vehicle, interior and exterior, to judge their condition. The adjusting software has examples of what the condition of vehicles of similar age would be, and they compare your vehicle against the expectation, and assigns each category a rating. Your car's paint job could be above-average, for example, while the condition of the engine is just average.

Comparable research

Many insurers use standardised software created by certain companies, like CCC Pathways or Mitchell, to write estimates and create total loss values. Whichever company's software your adjuster is using will take the data about your vehicle and compare it against other vehicles of similar make and model in your area. The software company gathers data from sources including DMV records, private listings and car dealerships to create a list of comparable vehicles.


Using your vehicle's data, the data company will adjust the sales prices for the comparable vehicles either up or down, to account for differences like options packages or mileage. It then takes the average of the sales prices and makes a final adjustment based on the condition of your vehicle. This final price is considered the actual cash value of your vehicle, and becomes the basis of your settlement. Your insurer subtracts your deductible and any applicable fees from this figure.

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