Cars lose their value over time due to factors like wear and tear, mileage, and age. However, getting into an accident can accelerate this depreciation, especially if there is extensive damage involved.
In such cases, your car will have a diminished value, which refers to the difference between its value before the accident and its value after the repairs have been made.
Filing a diminished value claim can help you recover some of the money you would lose by selling a car that has been in an accident. Let’s dive deeper into understanding and calculating diminished value, as well as the process of filing a claim.
Understanding Diminished Value Claims
There are three types of diminished value claims: immediate, inherent, and repair-related. Here’s what you need to know about each one.
Immediate
An immediate diminished value claim aims to compensate you for the immediate loss in your vehicle’s value right after an accident, even before the repairs are done. This type of claim is uncommon and is usually seen only in court cases.
Inherent
When your car gets into an accident, it will experience a loss in value, even if the accident was minor. If you file an inherent diminished value claim, you are essentially asking the insurer to pay you the difference between your car’s value after the accident and its hypothetical selling price before the accident occurred.
Repair-Related
A repair-related diminished value claim arises when your vehicle is repaired after an accident, but the repairs were not done properly or were of poor quality. Faulty parts and incomplete repairs can further decrease your car’s value. This type of claim allows you to seek compensation for the additional loss in value caused by the subpar repairs.
How to Calculate Diminished Value
Most insurance companies use a formula called 17c to calculate diminished value. Although the process is somewhat complicated, you can research and calculate it on your own. Here are the general steps:
- Find your car’s fair market value using online tools such as NADA, Kelley Blue Book (KBB), or Edmunds.
- Multiply your car’s value by 10% to determine the base loss of value, which is the maximum amount your insurance provider will compensate you after a covered claim.
- Find the damage multiplier based on the amount of damage sustained by your car in the accident, and multiply it by the base loss of value.
- Apply the mileage multiplier, which accounts for the impact of mileage on your car’s value, to the adjusted value obtained in the previous step.
How to File a Diminished Value Claim
Filing a diminished value claim differs from filing a regular car insurance claim and requires some effort on your part. Here is a basic overview of the process:
- Contact your insurance company to determine whether you should file the claim with them or with the at-fault driver’s insurance company.
- Call the appropriate insurance company and request to file a diminished value claim. Provide all necessary paperwork and documentation.
- Calculate your car’s diminished value using the 17c formula. Hiring an independent appraiser is also an option if you believe the calculation might result in a significant financial loss.
- Submit all the paperwork and wait for a response from the insurance company. Additional information, such as a vehicle appraisal, may be requested by the adjuster.
When Should You File a Diminished Value Claim?
While you typically have a window of at least two years to file a diminished value claim, it is advisable to file it as soon as possible. Early filing allows you to recoup costs sooner and provides easier access to evidence of the accident and the resulting damage to your car. Check your state’s specific time limit for filing a claim if immediate filing is not possible.
How Long Does It Take to Settle a Diminished Value Claim?
The duration of settling a diminished value claim varies depending on factors such as the insurance company’s process, the type of claim, and your state’s regulations. The process generally takes a few weeks, but it could extend beyond a month.
Is a Diminished Value Claim Worth It?
Filing a diminished value claim can be beneficial for some drivers, but it depends on the situation and your state’s laws regarding these claims. Generally, filing a diminished value claim makes sense if you were not at fault for the accident. It may also be appropriate if your car has high value and low mileage or is relatively new. However, if your car is older or was already in poor condition, filing the claim might not be worth it.
Frequently Asked Questions (FAQs)
Is diminished value negotiable?
Diminished value can be negotiated, depending on the insurance company and the specifics of the claim. Having an independent appraisal to support your claim can make negotiation easier.
How much value does a car lose after an accident?
The actual loss in value varies depending on the severity of the damage, the age of the vehicle, and the type of vehicle. On average, a car that has been in an accident may lose around $500 in resale value.
What is a good settlement offer for a car accident?
A good settlement offer should cover all costs incurred due to the accident, including medical bills, loss of work, and vehicle damage. It is advisable to consult with a lawyer before accepting a settlement offer if possible.
Is diminished value the same as depreciation?
No, diminished value and depreciation are different. Diminished value is the difference between a car’s market value before and after an accident, while depreciation is the overall loss in value over time due to factors like wear and tear, mileage, age, and general condition.
Can a claim affect the value of a car?
A diminished value claim does not directly affect the value of your car. However, if your vehicle is damaged and fully repaired, its value may still decrease even after the repairs are done.
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