Everything to Know About Diminished Value Accident Claims
Brian White | December 3, 2020 | Auto Accidents
There are several things to think about after getting in a car accident. Even once necessary repairs are made, your vehicle likely will not be worth as much as it was before the collision. This means your vehicle has what’s called a diminished value.
A vehicle’s diminished value can be calculated by taking the value of the vehicle before the collision, then subtracting the value of the vehicle after the collision and repair work. The number you’re left with is the diminished value—a price tag for the irreparable damage that was caused in the accident.
Even if a repairperson succeeds at restoring your vehicle so that it looks and functions the same way it did before the accident, the unfortunate fact is that there will still be some level of irreparable damage. That’s because the accident will be listed in your vehicle’s history report, which can be accessed through services like Carfax and will surely lower the offers you receive on your vehicle when it comes time to sell. Checking the Carfax report has become standard practice before buying a vehicle.
In many cases, insurance companies have a legal obligation to compensate policyholders for the diminished value of their cars after an accident. Still—for a few reasons—getting an insurer to follow through on that obligation and pay up isn’t quite so simple.
Here is everything you should understand about bringing a diminished value claim in Texas.
Why Don’t All Insurers Automatically Cover the Diminished Value?
Insurance companies are a business and businesses don’t want to lose out on money if they don’t need to. Many policyholders are not aware that they can be compensated for the diminished value of their vehicle if the accident was not their fault, and insurers won’t typically go out of their way to tell them.
Even if you do understand diminished value, insurance companies know that, often, the cost of bringing an expert in to speak to the diminished value of your vehicle is higher than the diminished value itself. An insurer can get away with refusing to pay if they know that the claimant would lose money by challenging them.
So, Is Bringing a Diminished Value Claim Worth It?
That depends on your situation. How much money is the insurance company withholding from you? If you are being shorted $50, $100, $200, you may have to cut your losses and let the insurance company win, but if you believe you are entitled to more—the diminished value can amount to several thousand dollars in some instances—then you may want to pursue it.
Of course, figuring out how much you are owed is part of the challenge, but even before investigating too carefully, you may have a general idea of how big of an impact the accident would have on your car’s market value.
How Much Is the Average Diminished Value Claim Worth?
This is a challenging figure to pinpoint. According to Carfax data, a history of damage to the car will decrease its value by an average of $500, and a history of severe damage will decrease the car’s value even more, by $2,100 on average. We know that fair compensation for diminished value can amount to significantly more.
It’s important to remember that insurance companies, when unchecked, are known to pay far less than what’s deserved, which may skew the data.
Trying to estimate diminished values with an online calculator isn’t very helpful either. Appraisals have an element of subjectivity, so online diminished value calculators don’t produce the most accurate information.
How Do I Make a Diminished Value Claim?
When dealing with the insurance agent assigned to your claim, mention getting compensated for diminished value and be aware that they may deny it exists, or that you qualify. It does exist, and if you can prove three things, then you qualify:
- You must prove that your car lost value because of the accident.
- You must prove that there is a specific dollar amount of the value you lost.
- You must show that the insurance company’s policy covers diminished value.
It’s smart to save all receipts and estimates related to your claim, including any paperwork from auto repair shops and information about parts that were replaced in the process. These will all be important for proving that you qualify for diminished value compensation.
You will also need to figure out the current market value of your market vehicle and show that the value is lower than it was. Several factors play into this, like your vehicle’s make and model, your location, the extent of the repairs that were done, previous accidents the car has been in, and other conditions like mileage and age that would determine the car’s desirability to potential buyers.
When you’re ready, the information you’ve gathered should be presented to your insurance company along with a diminished value claim.
How Do I Go About Finding My Car’s Current and Previous Market Value?
In theory, calculating diminished value is a simple case of subtraction, but in practice, it’s much more complicated. Kelley Blue Book values might be a start—they can be useful for determining the market value of your car before any repairs—but they aren’t enough to go off of alone. Insurers are also known to use their own formulas for calculating diminished value, generally lowballing the amount they owe you.
Presenting a dollar amount for your vehicle’s diminished value is where people require the most help. Auto appraisers and personal injury attorneys can help assess the situation and get a more fair estimate of your diminished value. If they believe your vehicle is worth more than the insurance company claims, you will have professionals by your side to fight for a just settlement.
Often, professional help and legal representation will add enough money to your final settlement to more than cover their fees. It’s unfortunate that a lawsuit is sometimes the best way to go in order for insurance companies to follow through on their obligations, but it’s often the best chance for success.