Replacement value: Important key figure for the car insurance

The replacement value is the value that must be paid in the case of damages in order to recover a damaged item. The replacement value of motor insurance equals the value of a comparable other vehicle if it has been damaged.

Thus, this value is a cost that must be incurred for the equivalent replacement of a damaged item. It is taken into account that the item is purchased from a trustworthy dealer and that possible additional costs for financing can arise.

Where the replacement value plays a role

The replacement value is usually an important calculation parameter for claim settlement. Thus, this value is mainly used in the insurance industry.

Here it is mainly property insurance such as motor insurance, home insurance or building insurance, working with the replacement value.

However, in the banking industry, too, the replacement value or the replacement cost is used. It is a measurement method to calculate financial derivatives.

Difference to the time value

The replacement value and the time value are both standard values ​​for determining the value of a thing, often a motor vehicle. However, these two values ​​differ from each other.

value Replacement cost
  • It starts from a hypothetical price that a thing would have achieved before it was damaged in a sale
  • Is determined by deduction of age and wear
  • Indicates the value needed to replace a damaged item with an equivalent item, including additional costs for financing or dealer surcharges
  • Determined by various criteria, age and wear also play a role

Due to the inclusion of dealer costs or additional financing costs, the replacement value is usually around one fifth above the fair value. The fair value usually does not play a role in determining the replacement value.

For used cars, the time value or the replacement value is usually always below the new value of a vehicle. The replacement value may be higher than the original value because the product has in the meantime become more expensive.

For classic cars, the replacement value will usually be above the new value, as the old vehicles can achieve high collector values.

Why is the replacement value important?

The replacement value is important to the car insurance company in order to determine the costs necessary to adequately replace the damaged vehicle. With the transfer of the replacement value, part of the claim for damages can be repaid after an accident.

Basically, injured parties have the opportunity to choose damages in two different forms:

  • Replacement value : If a car can no longer be driven due to a total loss, the insurance company determines the replacement value. This is usually charged to the so-called residual value of the vehicle and is paid to the injured.
  • Repair costs : If the vehicle is only damaged, but can still be used, the opposing insurance will refund the repair costs. These are determined and paid on the basis of an expert report.

Influence on insurance payment

The replacement value indicates how much money you will receive after an accident for your damaged and no longer roadworthy car. After an appraiser has determined the replacement value of your accident vehicle, the amount is paid out after an examination by the insurance company.

Why a new price compensation can make more sense

If you take out a car insurance, you often have the option of a new price compensation for partial and full insurance. Some insurance companies even offer this service automatically in connection with a total loss or theft.

If your policy is equipped with such compensation, you will not receive the replacement value of your vehicle in the event of damage, but the original price you paid for it.

The original price compensation is often beneficial. If it is assumed that new cars already have a significant loss of value within the first year, you will receive more from your insurance company than the replacement value.

differential taxation

In used car trading today, about 75 percent is the so-called “differential taxation”. The tax authorities want to prevent dealers from having to pay VAT on their vehicles, even if they resell them.

For this reason, traders only have to pay VAT for the difference between the retailer’s purchase value and the retailer’s sales value.

This fact plays an important role in determining the replacement value. Because the expert can not calculate the correct VAT rate for the replacement concrete.

For this reason, a guideline of 2.4 percent of taxes is usually included. In this way, however, the replacement value for the policyholder, who later has to pay the full VAT of 19 percent on his vehicle, is reduced.

130 percent rule

If a vehicle has been damaged by an accident, the car insurance company always checks if a repair is possible.

If an appraiser finds that the cost of the repair exceeds the replacement value by more than 30 percent, insured persons will only receive the replacement value.

Example: your car is damaged. An appraiser finds that you need 4,000 euros to buy a comparable car (replacement value). The report also notes that a repair would cost 5,500 euros. In this case, the insurance classifies the vehicle as a total loss and pays you the replacement value.


The replacement value is determined by insurance with the help of an independent expert or expert. However, the calculation of the replacement value in a car is often very tricky.

Thus, the appraiser must determine after the accident, in which general condition the vehicle was, which damage already existed or which were added.

A first orientation usually provide price determination tables for used cars. Thus, the replacement value always depends on the current market prices.

In addition, the following aspects determine the amount of the replacement value:

  • Mileage : The more miles a car has been driven, the lower its time value.
  • Equipment : If the wagon had extensive special equipment, the replacement value will be much higher than standard equipment. These include, for example, leather seats or special alloy wheels.
  • First registration : For the valuation it plays a big role, how old the vehicle is in the end.
  • General condition : Here the expert checks whether the vehicle is maintained or not. Unkempt cars generally receive a significantly lower replacement value. Since the condition of the vehicle care can be interpreted quite differently and is difficult to determine depending on the extent of the damage, this aspect can often lead to disputes about the amount of the replacement value.

Replacement value approx. 20 percent above fair value

Typically, the replacement value is approximately 20 percent above the fair value, as the fair value is only a hypothetical value that the destroyed item would have had in a potential sale prior to the accident.

In practice, the replacement value takes into account how much money the injured party has to pay in order to receive adequate compensation for his vehicle.

Unfair value: you can do that

If you as a consumer consider that the replacement value of your car was unfairly calculated, you can take legal action against it. In this case another report has to be prepared.

The cost of such an action can quickly amount to several thousand euros, because the amount of the costs depends on the amount in dispute. At the same time, the fee of the appraiser also depends on the amount of damage. The bigger the damage, the more expensive the appraiser will be.

Anyone who has traffic rights protection can fall back on his insurance in this case and usually has to pay nothing in addition to a deductible in addition to a lawyer.