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Texas insurance glossary

Actual cash value

Actual cash value is what a vehicle was worth immediately before it was damaged, which is its replacement cost reduced by depreciation for age, mileage and condition.

Sources checked

It is the standard most Texas auto policies settle on. Not what the car cost new, not what is left on the loan, and not what a dealer would charge to replace it — what that particular vehicle, at that mileage and in that condition, was worth on the day.

The gap between actual cash value and a loan balance is a real amount of money, and it is why gap insurance exists. A financed car declared a total loss can settle for less than the borrower still owes, and the loan does not go away because the car did.

Where a settlement is disputed, the argument is almost always about condition and comparable sales rather than about the method.

Sources: TDI — home insurance glossary; TDI — automobile insurance guide (CB020). Verified .

A definition, not legal advice and not a quote. Rules and figures change; confirm your own situation against the source named above, or with us, before you act on it. Last checked .

See also

  • Total loss A vehicle is a total loss when the cost to repair it, sometimes with the salvage value added, meets or exceeds what the vehicle was worth before the damage.
  • Collision coverage Collision coverage pays to repair or replace the insured’s own vehicle after it hits another vehicle or an object, or overturns, whoever was at fault.
  • Comprehensive coverage Comprehensive coverage pays for damage to the insured’s own vehicle from causes other than collision, such as theft, hail, fire, flood, vandalism and animal strikes.
  • Deductible A deductible is the amount of a claim the policyholder keeps: the insurer pays the covered loss above it, and nothing at or below it.
  • Gap insurance Gap insurance pays the difference between what a totaled vehicle was worth and what is still owed on it, where the loan balance is the larger number.

Where this is handled

Knowing what a coverage is called is not the same as knowing what is on your policy. One independent agency can read your declarations page with you and compare the markets that will write your record.

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