Diminished value refers to the change in your car’s market value after an accident. After an accident, your car will decrease in value, regardless of the repairs it has gone through. An accident will also show on your car’s history, potentially impacting a buyer’s sentiment toward purchasing your car.
You may encounter diminished value when you try to sell your car or receive a trade-in value for another vehicle. However, depending on the insurance policies that you and the other driver involved in the accident have, insurance may cover the costs to bring your car back to its condition before the accident. You may also be able to file a diminished value claim with your insurance provider to regain some of the decreased value of your car.
Types of Diminished Value Claims
Inherent Diminished Value
Inherent diminished value is one of the most common types of diminished value claims and refers to the value that a car loses just by being in an accident, even after proper repair. Even if the repairs leave the car in good-as-new condition, just the fact that it has a history of damage makes it decreased in worth to potential buyers.
Immediate Diminished Value
Immediate diminished value refers to the worth of a car after an accident, but before repairs. This type of diminished value claim is less common.
Repair-Related Diminished Value
If your car undergoes unsatisfactory repairs after being damaged in an accident, you may experience repair-related diminished value. This can occur if generic parts are used in a repair, or if portions of the vehicle are repaired using a different paint color.
When to File a Diminished Claim
Car owners should file a diminished value claim if they experience an accident in which they’re not at fault. In all states except for Michigan, drivers may receive compensation for diminished value if the accident was the fault of another driver. If you’re at fault in an accident, or if you damage your own vehicle while driving, you are generally ineligible for a diminished value claim.
For example, if you are rear-ended by another driver and need to get your bumper replaced, you’ll probably be able to file a diminished value claim. But if you accidentally back into a lamppost and damage your bumper, you won’t be eligible to file.
In order to file a diminished value claim, you should first get your car repaired in order to figure out how much damage has been sustained. Then contact your insurance company and provide proof of diminished value.
When Is Diminished Value Covered?
Diminished value is almost always covered if you’re in an accident in which the other driver is at fault. In general, diminished value is not covered if you’re at fault in a collision with another vehicle, or if you damage your own vehicle while driving. If your car insurance policy includes collision coverage, it most likely also includes diminished value coverage.
What if the Other Driver Is Uninsured?
If you’re in a car accident and the other driver is uninsured, you may still be able to file a diminished value claim. You should check with your insurance provider to see if diminished value is covered under your uninsured motorist coverage.
How to File a Diminished Value Claim
When filing a diminished value claim, you should first determine who was at fault for the accident. If you are at fault, then you will most likely be denied for a diminished value claim. However, if you were not at fault, you will have to contact the other driver’s insurance provider to identify the diminished value claim process. Here are the steps to file a diminished value claim:
- Step 1. Document your car’s sales value: Use a tool such as Kelley Blue Book to document your car’s value.
- Step 2. Research the insurance company’s process and gather required documents: Gather the documents required in the claim process, such as photos taken at the accident scene, documents, and invoices of the car repairs made after the accident.
- Step 3. Identify the state in which you are applying: State laws differ in handling diminished value claims. Normally, if you were not at fault for the accident, all states approve compensation for a diminished value claim except Michigan.
- Step 4. Find a licensed appraiser: Search for a reliable, licensed appraiser to prove your car’s diminished value by getting a car appraisal from a certified professional.
- Step 5. Satisfy all conditions set by the insurance company: Cooperate with the agent and satisfy all conditions set by the insurance company for the claim. Doing so will help ensure you receive the diminished value claim.
- Step 6. Wait for the diminished value claim: The insurance company will want to have the vehicle inspected by an expert. Then you must wait until the insurance company determines the diminished value claim.
How Diminished Value is Calculated
In the U.S., most insurance companies abide by 17c, which is a formula that determines the value of a vehicle after an accident. The diminished value formula originated in Georgia through a claims case that appeared in a court records case in paragraph 17, section c. Since then, the formula has been adopted by the insurance industry.
Below, you’ll learn how 17c works and how to calculate the actual diminished value.
How 17c works:
Step 1. Identify the sales value of your car: Determine the sales value of your car using tools like Kelley Blue Book.
Step 2. Follow the 10% cap rule on the 17c formula: Multiply the retail value of the car by .10 to identify the “base loss of value,” as stated in the 17c formula.
Step 3. Apply a damage multiplier: Use a damage multiplier to determine the amount of any structural damage to your car. You can take the number from step two and multiply it by the number that best describes the damage to your car:
- 1: severe structural damage
- 0.75: major damage to structure and panels
- 0.50: moderate damage to structure and panels
- 0.25: minor damage to structure and panels
- 0.00: no structural damage or replaced
Step 4. Apply a mileage multiplier: The insurance company will then view your car’s mileage and deduct depending on the mileage. Determine your car’s mileage with the numbers below, then multiply it by the number from step three.
- 1.0: 0-19,999 miles
- 0.80: 20,000-39,999 miles
- 0.60: 40,000-59,999 miles
- 0.40: 60,000-79,999 miles
- 0.20: 80,000-99.999 miles
- 0.00: 100,000+ miles
Once this step is completed, you will arrive at your car’s diminished value.
The diminished value claim process can be difficult and take some time to complete. If the value of your car has depreciated significantly after an accident and cannot be restored to its original condition, you may be able to offset the financial loss by filing a diminished value claim.
All states except for Michigan allow drivers who are not at fault in an accident to file diminished value claims.
If you are eligible for a diminished value claim but your insurance provider refuses to pay diminished value after a car accident, you should contact your state insurance commissioner to see if they can help. You may also want to hire a lawyer if you wish to pursue your claim further.
First, determine the value of your car before the accident using sites like Kelley Blue Book. Then, you can get a professional evaluation concerning the value of your car post-accident. In some cases, you may also be able to ask your car dealership what the trade-in value of your car would be. If you subtract the current value of your car from the value of your car before the accident, you’ll get the number by which your car diminished in value as a result of the accident.
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