Diminished Value Claims Explained | Bankrate
The market value of your vehicle is higher when it is new. once you take it off the lot, it may lose value. The older your car is and the more miles it has, the lower its value. After a car accident, the value of your car can drop even further. this is called diminished value, which is the difference in the market value of your car before and after the accident. Depending on the circumstances of the accident, an auto insurance company might pay for the decline in value of your vehicle after a covered loss. Understanding diminished value could give you the tools to successfully file a claim if an accident damages the value of your vehicle.
what is diminished value?
After an accident, the market value of your car will decrease even if you go through all the necessary procedures to restore it to its previous condition. Diminished value is the difference in the market value of your car before and after an accident. Even if you try to resell your vehicle, carfax and similar reports will show that it has been involved in an accident, reducing its market value. An diminished value claim, or diminished value claim, can help recover lost value you may have when you go to sell your car or trade it in for a different vehicle.
Reading: How to get diminished value from insurance company
decremented value types
There are three types of diminished value. each type relates to the depreciation in the cost of your vehicle after an accident.
inherent diminished value
This is the most common and accepted form of reduced value for a car accident. Inherent diminished value occurs when a vehicle loses value because it now has a history of damage, which is noted on auto history reports. this type of diminished value assumes that the repairs to the vehicle were of optimum quality and represents the amount that the value of the vehicle will decrease based on accident history.
immediate decreased value
This type of reduced value vehicle represents the difference in resale value immediately after an accident and before the vehicle is repaired. Although this is the type of reduced value court systems use, it is rarely used when filing a reduced value claim with an insurance company, since the company covers the cost of repairs immediately after a covered accident. /p>
decreased value related to repair
This refers to the loss of value of the vehicle due to substandard repairs made after an accident. For example, if the paint is repaired to a color that does not exactly match or if aftermarket parts are used instead of original equipment manufacturer (OEM) parts, the quality of the repair leaves a loss in value beyond the Reduced value of the vehicle that now exists because of the accident. this reduced value assumes the vehicle cannot be restored to its pre-accident condition.
calculate diminished value
Most insurance companies in the United States use a calculation called the 17c reduced value formula to determine the new value of a vehicle after an accident. This formula originated in a Georgia claims case involving a state farm, where it appeared as Paragraph 17, Section C, from which it got its name. Below are the steps used to calculate the diminished value under this formula.
step 1: determine the value of your car.
You can determine the sale or market value of your vehicle using the Nada or Kelley Blue Book websites. both offer a calculator where you can enter some data about your vehicle. You will need to include the year, make, model, mileage, and extent of damage done to your car.
Step 2: Apply a 10% limit to that value.
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Insurance companies typically apply a 10% cap, known as base value loss, to the estimated sale value of your vehicle for nothing or Kelley Blue Book. this cap is the maximum amount your insurance company will pay for the claim.
step 3: apply a damage multiplier.
Insurance companies use a damage multiplier to adjust the value of the vehicle described in step two. the 10% cap value is multiplied by a number ranging from 0.00 to 1.00 depending on the structural damage done to your car after an accident. the 0.00 multiplier represents no structural damage or replaced panels, while the 1.00 multiplier represents vehicles with severe structural damage.
Step 4: Apply a mileage multiplier.
While Nada and Kelley Blue Book take your car’s mileage into account when determining value, insurance companies figure their own mileage deduction. the value adjusted in step three is multiplied by one of these mileage multipliers to calculate the final diminished value of your vehicle.
Under the 17c formula, to calculate the reduced value of your car, you would take the value of your vehicle and multiply it by a cap of 10%. it would then apply a damage multiplier based on the damage to your car and a mileage multiplier based on your mileage.
For example, if the market value of your vehicle is $15,000 with moderate damage to the frame and panels and 20,000 miles, your formula for calculating reduced value would be:
$15,000 x .10 = $1,500 which would be the most you would receive for a reduced value from an auto insurer.
$1,500 x .50 = $750 which would be the adjusted value for moderate damage.
$750 x .80 = $600 which would be the adjusted value for vehicles with 20,000 miles.
how to file a diminished value claim
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Filing a claim for diminished value can be more complicated than filing a claim for other matters because the burden of proving the car’s diminished value is generally your responsibility.
If you are at fault for the accident, your claim for diminished value will likely be denied. if the other driver is at fault, then you should contact your auto insurer to discuss their reduced value claim process.
Here are the steps to file a diminished value claim:
- Check the insurance company’s process for filing a reduced value claim.
- document the market value of the car using the kelley blue book calculator tools or nothing.
- Prove the reduced value of your car. Having photos and documents from the scene of the accident and the damage to your vehicle can help your case. You may be required to obtain an appraisal from a certified vehicle adjuster as part of the claim process.
- comply with all insurance company conditions for reduced value. this gives you the best chance of having your reduced value claim approved.
It is important to note that state regulations also affect how reduced value claims are handled. Since each state has different statutes regarding insurance, researching your state laws will help you better understand your rights regarding the decline in value of your vehicle.
considerations when filing a diminished value claim
Filing a reduced value claim is not the right option for everyone. you may or may not receive a payment when filing a reduced value claim. Some things to consider are:
- The value of your vehicle before the accident: If you drive an older car that has high mileage or structural damage, you may not receive a diminished value payment.
- If you were at fault: If you caused the accident, your insurance company will most likely not pay a reduced value claim.
- If you are involved in an accident with an uninsured motorist: If you have uninsured motorist coverage with your insurer, you have a slightly higher chance of receiving compensation for a reduced value claim.
- Which state you live in: Each state has different regulations regarding reduced value claims.
is a diminished value claim worth it?
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how long does it take to settle a diminished value claim?
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Because each state has different statutes for reduced value payments, it’s important to research your state’s regulations. all states except michigan allow some level of diminished value claim to be filed if the other party is at fault.
when to file a diminished claim
If you are involved in an accident where the other party is at fault, it may make sense to file a reduced value claim so you can recover the difference in value of your vehicle. In most cases, you cannot file a diminished claim against your own insurance company, which means trying to file if you are at fault in an accident will likely be denied. You can file a reduced value claim with your own insurance company if the at-fault driver is an uninsured motorist or if you are the victim of a hit-and-run.
It is generally best to file a reduced claim with the at-fault party’s insurance company as soon as possible, preferably within days of the accident. It is often easier to present your case (with supporting documentation) when you present it quickly. Also, the value of your vehicle could decrease the longer you wait to file a claim. each state may have its own statute of limitations that requires you to file a claim within a certain period of time from the accident.