If you are in an accident, you should expect that your car’s market value will decrease. Your insurance company can cover you for car repairs if you have auto insurance. However, restoring your vehicle does not alleviate the fact that your car’s worth will still decrease.
With this, filing a diminished value claim comes in. In this post, we will be presenting to you the basics of diminished value claims.
Read on if you want to know what is diminished value claim, its types, how it is calculated, filed, and the things you need to consider before filing it.
Diminished Value by Definition
Restoring your car to its initial condition after an accident will not stop your vehicle’s value from decreasing. Diminished value is the change in a vehicle’s market value before and after being involved in an accident.
With a recorded history of an accident, its market value is expected to go downhill. A diminished value claim aids in recovering the expenses to restore your car’s original market price or selling price before an accident. If successfully done, this claim pays owners with the amount difference.
Diminished Value Types
There are various types of diminished value. These types are associated with the cost of depreciation of your car post-accident.
1. Inherent Diminished Value
Inherent Diminished Value is considered the most common type. It is applicable for vehicles that lost their value due to a damage history shown in its report. This diminished value type regards the repairs as optimum and bases the amount reduction in the car’s value on the accident record.
2. Repair-Related Diminished Value
Repair-Related Diminished Value is the loss of a car’s value that depends on the post-accident low-quality repairs. Paint mismatches and the use of aftermarket parts for repairs can lead to a loss in the vehicle’s value. This diminished value type assumes that the car is not restorable to its original form.
3. Immediate Diminished Value
Immediate Diminished Value is the change in resale value right after an accident and before repairs. This type is not commonly used for filing since most insurance companies provide damage repairs immediately post-accidents.
Diminished Value Calculation
Insurance companies located in the United States mostly use the 17c Diminished Value Formula in calculating new vehicle values after an accident. The 17c Diminished Value Formula started in Georgia. Here are the steps in calculating diminished value using this formula:
Step 1: Determine Vehicle’s Value
In determining your vehicle’s value, you can utilize the National Automobile Dealers Association’s (NADA) website. On this site, you can get an appraisal for the value of your vehicle.
You are expected to receive accurate values by placing detailed information regarding your vehicle. Listed here are some of the details that can affect your vehicle’s value.
- Year
- Model
- Condition
- Engine
- Color
- Mileage
- Wheel type
- The extent of Vehicle Damage
Step 2: Put A 10% Cap to the Determined Value
Most insurance providers add a 10% cap to the determined value, and it is often referred to as the value’s base loss. The 10% cap is the ceiling limit that your insurance provider will pay when you file a claim.
Step 3: Use A Multiplier for Damage
Insurance companies utilize a damage multiplier for vehicle value adjustments. Here, you multiply the 10% cap value with a number from zero to one based on your vehicle’s corresponding damage post-accident.
The one multiplier corresponds to vehicles with severe structural damage, while the zero multipliers correspond to cars with no structural damage. Here is the breakdown of the multiplier with the corresponding damage levels to a vehicle:
- 1.00 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
Step 4: Use A Multiplier for Mileage
NADA considers your car’s mileage in pricing your vehicle, while insurance companies have a calculation for mileage deduction. Thus, the value you obtain from the previous step multiplies to a multiplier for mileage to get your vehicle’s final diminished value.
Here is the breakdown of the multiplier with the corresponding mileage ranges to a vehicle:
- 1.00 0-19,999 miles
- 0.80 20,000-29,999 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
Diminished Value Claim Filing
The following step requires you to give proof of your vehicle’s diminished value. A professional who can appraise your car is significant in this step and the success of your filing.
Ensure that you submit to all of the conditions for the claim to secure monetary compensation for the accident.
Process For Filing A Claim
Given an accident where you are responsible, you will likely not have your diminished value claim approved; however, if the other person is responsible for the accident, see to it that you contact their insurance provider to go over the process of filing a diminished value claim.
First, read the rules on filing a diminished value claim. If, in case, the other driver does not have insurance coverage, you have to look for uninsured motorist coverage. Proper documentation of the vehicle’s value from a credible source is also required.
Remember to include photos at the scene of the accident and evidence of repairs post-accident. Check the requirements and ensure that you prepare them beforehand.
Different states have different laws for diminished value claims. With this in mind, it is crucial to be aware of the state law that applies to your situation to have a clear picture of your rights on your vehicle’s diminished value.
Time To File A Diminished Value Claim
It is recommendable to file a diminished value claim immediately post-accident to recoup most of the difference from your vehicle’s value. Most cases file a claim within a few days post-accident.
It is helpful to file claims with ready evidence to expedite the process. Delaying the filing of a diminished value claim can further reduce your vehicle’s value.
Do not attempt to file a claim if you are responsible for the given accident.
The Worth of Diminished Value Claim
Diminished value claims may seem tedious, but it is worth it if your vehicle’s value depreciates greatly post-accident. This claim can provide you with monetary compensation for the vehicle’s value that suffered significant financial loss.
Insurance Companies Role In Diminished Value Claim
You have the central role in providing proofs for your vehicle’s diminished value. The insurance company pays for the claim if you can provide substantial evidence for your claim.
Insurance companies from different states will also be handling claims differently depending on the state law that encompasses them.
Duration of Diminished Value Claim Settlement
Diminished value claim settlement duration is longer compared to typical auto claims since it is more complex. You can expect it to go on for several weeks and months until it is completed.
You might be required to have a lawyer. The lawyer will be acting as an intermediary with the insurance company, which lengthens the overall process.
Things to Consider in Diminished Value Claim Filing
Filing a diminished value claim requires many things. Aside from the requirements that you have to check, there are also things that you must consider before filing a claim.
Here, we listed the things you need to check:
- Our Vehicle’s Value Before the Accident
- The Person At Fault
- The Presence of An Uninsured Driver
- The State You Are In
1. Your Vehicle’s Value Before the Accident
Older vehicles are expected to have more structural damages and mileage, decreasing the chances of getting monetary compensation for diminished value claims.
2. The Person At Fault
The person at fault should be the other person involved in the accident. Otherwise, you will not be compensated for your diminished value claim.
3. The Presence of An Uninsured Driver
The presence of uninsured motorist coverage allows you to file for a diminished value claim.
4. The State You Are In
Each state has corresponding laws for diminished value claims. Check which state you are in to determine which laws apply to your situation.
Final Takeaways
Restoring your car to its initial condition after an accident will not stop your vehicle’s value from decreasing.
With this, filing a diminished value claim can come in handy to help you get monetary compensation for your loss after an accident.
It is crucial to know what a diminished value claim is, its types, how it is calculated, filed, and the things you need to consider before filing it. All of this information can guide you in successfully filing a claim should you be involved in an accident.
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