Do Insurance Companies Have to Pay Diminished Value?

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Imagine buying a brand new car and then having some negligent driver plow into it. I don’t have to imagine it because it happened to me. I was involved in a multi-car accident, and I was not the at-fault driver. Two of the cars were clunkers with mild damage, so those drivers fled the scene, leaving me there with a very nice—and now ruined—car. This could happen to you.

Experiencing a car accident is traumatizing, but the consequences can reach far beyond the initial crash. In addition to any injuries and property damage caused by the crash, accident victims must also face the financial losses that are associated with selling a damaged car. Even if your car isn’t brand new, you could still lose quite a bit of money if you’re in a wreck.

Vehicle owners may not feel the impact of the financial hit they may take from that sale until years after the wreck. However, it will still affect them just as profoundly then as it would have shortly after the accident. Often, the insurance companies are of no help at all. 

What Is Diminished Value? 

Diminished value of a vehicle means being put in a position where you are forced to accept less than your vehicle is worth. Owners may have to accept thousands of dollars less than they’d expected because buyers are reluctant to purchase a car that has been involved in an accident. There are three kinds of diminished value

  1. Immediate – This is when you lose money when you trade your car in or resell it immediately after an accident. 
  2. Inherent diminished – This is when you lose money repairing your vehicle so you can get more when you trade it in or resell it.
  3. Repair-related – This is when you lose money because you invested in repairs and they weren’t done well.

Unfortunately, insurance companies may not have to cover these losses. When this happens, the loss will come out of the vehicle’s owner, adding insult to injury if the accident happened through no fault of their own. 

Won’t My Insurance Pay for the Losses?

In every state except Michigan, if the insured was not the at-fault driver, an insurance company is responsible for covering diminished value. While this may appear to be cut and dried, there are a variety of measures insurance companies take to avoid paying for these losses, and state laws differ in their regulations.

Generally, if a motorist demonstrates that the other driver was clearly at fault, the insurance company will cover the losses. This may be the at-fault driver’s insurance, a personal protection plan, or uninsured or underinsured motorist coverage.

If you were determined to be at fault in your accident, your insurance company may refuse to pay your claim. They could also deny your coverage altogether if you don’t provide evidence that proves your claim. 

Don’t be afraid to call your insurance company to ask for additional clarification if you have questions. In addition to this, be sure to check your state’s laws and your insurance policy so you are clear on the compensation that may be available to you. 

How Are These Losses Calculated?

Insurance companies do not have a single standard to calculate the diminished value of a vehicle. Be prepared for the possibility that the insurance company may dispute the figure you present them, even if you have an estimate or bill to show them. If you feel that you have been wrongfully denied compensation, you may be able to dispute it. 

An attorney can help you to dispute a settlement if the insurance company isn’t offering enough. They can also help to get your diminished value covered if the company denies it. According to Pintas & Mullins, a law firm that has secured many seven- and six-figure settlements for their clients who have been in car accidents, every case is unique so it’s best to speak to an attorney to find out what your settlement may look like.

Getting an attorney’s help can alleviate any financial burdens that were caused by your accident while helping you to obtain a better, newer vehicle. You have everything to gain and nothing to lose by seeing a lawyer to learn more about your rights.

When Should I File a Diminished Value Claim?

Anytime you are involved in an accident that diminishes the value of your vehicle in a sale and you are not at fault, you should file a claim. If you live in a state that requires drivers to carry uninsured and underinsured motorist coverage, you will be able to file this claim against your own insurance policy.

If your state’s laws don’t require you to carry this type of coverage, you should really consider getting it anyway. Trust me, you do not want to end up in the situation I found myself in. You can’t always count on other drivers following the law, so you’ve got to make sure to protect yourself. 

How Do I File a Diminished Value Claim?

Before you file a diminished value claim, you’ll need to collect some information to give to your insurer. Here are the steps involved.

Kelly Blue Book

Most drivers are familiar with the Kelly Blue Book, but if you aren’t, it’s a book (and now also a website) that is indispensable when it comes to determining the value of a vehicle. You’ll need to visit this website and enter your car’s make, year, model, condition, and mileage to find out how much your vehicle would have been worth if it wasn’t for the accident. 

The Formula for Diminished Value

You can double-check your vehicle’s value on the National Automobile Dealers Association’s website. To determine the most amount of money an insurer will pay for your vehicle, multiply the value of your car by 10%. 

For example, if your car was worth $40,000 like mine was, the result of your calculation would be $4,000. As depressing as it is, this would be the amount your car is now worth in the eyes of your insurer. 

Contact the At-Fault Driver’s Insurer

Contact the auto insurance company of the at-fault driver and request to file a diminished value claim. You will need to provide the insurer with your information, and you can expect to have your vehicle inspected. It’s important to cooperate with the claims adjuster, but you may not want to speak to them without your attorney present. 

As long as fault can be proven, you will most likely be compensated for the difference between what your car was worth before their client’s negligence and what it’s worth now. This is a bit of a process, and you’ll need to be patient, but it will be worth the effort in the end.

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