If you get in a car accident, your car’s value will drop due to the damage. Even if you repair the damage, the car is considered to have an accident history, which makes the resale value lower. This resale value is the diminished value.
A diminished value claim allows you to recoup the difference between what your car is worth before and after a car accident.
To make a diminished value claim, you should first ask the insurer if they will pay for diminished value. If the company will pay, you should find out how much this will be and compare that number to what you think the market value should be. If you agree with their offer, then proceed with the claim. If you do not agree with the offer, you should ask them how to get a second opinion or what other information you need to provide. The insurer will likely have a formal process for this. However, you will need to decide on your own how much you are willing to accept.
Types of diminished value claims
There are three types of diminished value claims: immediate diminished value, inherent diminished value, and repair-related diminished value.
Immediate diminished value is the resale value immediately after a car accident but before any repairs have been made.This type of claim is rarely used because most people will get their car repaired before getting a claim.
Inherent diminished value is the most common type of diminished value claim. Inherent diminished value refers to the fact that even though the car may be repaired back to its original condition, the value is lower because buyers think it's lower. Even if the car looks and runs like new, the fact that it has an accident history will diminish the car’s worth for potential buyers. Therefore, you’ll get less money for the car if you try to sell it or trade it in.
Repair-related diminished value is the lost value that is resulting from the quality of repairs. For example, if aftermarket parts were used in the repairs, then the repair left a loss in value beyond the fact of the accident alone.
Calculating a diminished value claim
There are three ways to calculate the diminished value of your car. You can look it up online, you can use a formula estimator, or you can get a professional evaluation.
Ask for the trade-in value
Looking up the diminished value online is quick but less precise. Websites can tell you what the value of your car would be without the accident. You will need the year, make, model, mileage and extent of damage done to the car. Then you can ask your car dealer to give you a trade-in value on your car with the accident. This should give you an idea of the diminished value of your car.
The car dealer’s trade-in value may not be the best rate that you could get, but it is a good way to get an estimate.
Use a formula estimator
Calculating a diminished value claim using a formula estimator is the fastest but least precise option. Most U.S. insurance companies use a calculation called the 17c Diminished Value Formula to calculate the new value of a vehicle after an accident. To use this formula, first determine the value of your car using a website like you would use if you were looking up the diminished value online with a trade-in value estimate.
After you determine the value, you apply a ten percent cap to that value. This ten percent cap is known as the base loss of value. This is the maximum amount your insurance company will pay on the claim. Next, apply a damage multiplier to adjust the value of the vehicle after the ten percent cap. The 10 percent cap value is multiplied by a number ranging from 0.00 to 1.00 according to how severe the damage is from the car accident. The 0.00 multiplier represents no structural damage or replaced panels, while the 1.00 multiplier represents severe structural damage done to the vehicle.
The final step of the formula is to apply a mileage multiplier. Multiply the adjusted value after the damage multiplier by a mileage multiplier ranging from 0.00 to 1.00. The 0.00 multiplier represents damage equating to 100,000 or more miles, while the 1.00 multiplier represents damage equating to less than 20,000 miles.
Get a professional estimate
Getting a professional evaluation takes longer, but it is a more exact way to calculate the diminished value of your car. To get a professional evaluation, you can consult with a company that specializes in diminished value insurance valuations. The evaluation should provide you with a reliable number.
Before choosing the company, make sure that your evaluator is qualified and recognized by insurers so that the value claim will be accepted. Unfortunately, there isn’t one industry-wide diminished value calculator. Each insurance company uses a different formula.
What states will pay diminished value claims?
Depending where you live, you may be able to get compensated for the diminished value following a claim. Every state handles diminished value differently. If you were not responsible for the accident, insurance may pay a diminished value if you live in certain states. In other states, they may not pay at all. All states except Michigan allow drivers to file a diminished value claim if another party is at fault. Contact your state insurance commissioner's office to find out if your state covers these claims. The following states allow drivers to file a diminished value claim with the at-fault driver’s insurance company: Arizona, Colorado, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland, New Mexico, New York, Oregon, South Carolina, and Virginia.
When should you file a diminished value claim?
You have until the end of the statute of limitations that applies to the state that you live in to file a diminished car value claim.
This statute of limitations ranges from two to ten years. Car insurance companies can deny diminished value claims if they were not filed in time, so it is important to file the claim as soon as you are able to, preferably within a few days after the accident. You usually have a more compelling case if you file quickly. The value of your car could also decrease if you wait too long to file a claim.
It is also important to decide whether filing a diminished value claim is the best option for your situation. Before filing a diminished value claim, consider your car’s value before the accident, who was at fault, your state’s laws, and whether the other driver is insured.
Older cars with a lot of mileage or structural damage are not worth a lot, so it may not make sense to file a diminished value claim if you won’t get much compensation anyway.
If you are at fault for the accident, your insurance company won’t process a diminished value claim.
Some states have rules about how diminished value claims are calculated that may not be in your favor. It is best to ask a lawyer about your options or visit your state government’s website to find out how, or if, the claims will be processed.
Finally, if the other driver is at fault but doesn’t have car insurance, you may not be filing a diminished value claim through them. Instead, you would file a diminished value claim with your own insurance company if your policy includes uninsured motorist coverage.
Frequently Asked Questions
Can insurance companies deny diminished value claims?
Car insurance companies can deny diminished value claims if information is missing, if the paperwork wasn’t filed correctly, or if the claim wasn’t filed in time. If you are denied, you can contact the insurer or a lawyer to discuss your options.
Are insurance companies required to pay a diminished value claim?
Whether or not insurance companies are required to pay a diminished value claim depends on the state that you live in, and who was at fault.
How long do you have to file a diminished car value claim?
You have until the end of the statute of limitations that applies to the state that you live in to file a diminished car value claim. This statute of limitations ranges from two to 10 years.
How long does it take to get a claim settlement?
Diminished value claims can take weeks or even months to finalize. Diminished value claims usually take longer than standard auto claims due to their complexity. In some cases, you may even need to hire a lawyer as an intermediary with the insurance company, which can add time to the process.