The actual cash value of your vehicle is far less than you think it is. So goes the standard wisdom that comes along with the purchase of any new car, and in general, it is correct. Once a $30,000 vehicle has been purchased and driven off of the lot, its value has decreased by at least 20%, if not more, simply based on the fact that it is no longer "new." What many people do not realize is how the actual cash value of their car can affect their car insurance, especially in situations where a claim is made and an auto insurance payout is imminent.
The first way in which the actual cash value of a car can affect the auto insurance payout given by a company is in the case where the vehicle is written off. This can occur even if the vehicle can be fixed, but the insurance company determines that it would be cheaper simply to pay the customer the actual value of their car, rather than fix it. The actual cash value is determined by a number of factors, the most notable of which is the "blue book" value, which lists the estimated value of all car makes and models by year.
Once the insurance company has looked up that number, they will take into account things such as how far the vehicle has been driven, what options or upgrades the vehicle has, and what service the vehicle has received over the course of its life. What they discover will either increase or decrease what they consider to be the value of the vehicle. If the company arrives at a cash value number that is less than the cost to fix it, the vehicle will be written off and the client given only the amount the car was assessed at.
The second way that this value can affect consumers is in the case of an accident that occurs immediately after a new vehicle is purchased. Because a car depreciates in value so quickly, even an accident that occurs down the block from the dealership will mean that the car's value has decreased significantly. If the car is written off, an insured may receive five or even ten thousand dollars less than the worth of the car. In the case of a financed vehicle, this can mean a significant debt owed to the financing company, but without a payout to match.
For this reason, many insurance providers offer "gap insurance" to cover the gap between actual cash value and the blue book value of a new car. Having a rough idea of the value of your car can help to prevent unpleasant surprises should an accident occur.