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Cars lose their value over time through depreciation, which is caused by factors like normal wear and tear, mileage, and age. However, getting into an accident can cause your vehicle to depreciate more quickly, especially if there’s extensive damage.
If you get into an accident, your car will have a diminished value. It represents the difference between your car’s value before an accident and its value after an accident once the repairs have been made.
Filing a diminished value claim can help you recoup some of the money you would lose by selling a car that’s been in an accident.
Understanding diminished value claims
There are three different types of diminished value claims: immediate, inherent, and repair-related. Here’s what you need to know about each one.
With an immediate diminished value claim, you’re asking to be compensated for your vehicle’s loss in value immediately after an accident, and before the car is repaired. This type of claim is uncommon. You’ll typically only see immediate value claims in court.
After an accident, your car will lose value, even if the accident was minor. If you file an inherent diminished value claim, you’re essentially asking the insurer to pay you the difference between the car’s value after the accident and repairs, and what it would have sold for prior to the accident.
A repair-related diminished value claim occurs when your vehicle is repaired after an accident, but the repairs were not done properly, or the quality of work was poor. Because faulty parts and incomplete repairs can cause your car’s value to drop even further, this type of claim allows you to seek compensation for the additional loss in value.
How to calculate diminished value
Most insurance companies use a formula called 17c to calculate diminished value. The process of calculating diminished value is somewhat complicated, but you can figure it out yourself by doing some research.
Find your car’s value
To start, you will need to determine your car’s fair market value. Sites like NADA, Kelley Blue Book (KBB) and Edmunds have free online tools for this. Be prepared with information about your car, like the VIN, mileage, and trim level, which is used to estimate the value.
Multiply your car’s value by 10%
The next step is to multiply your car’s market value by 10%. This 10% addition is known as the base loss of value, which is often the highest amount of money your insurance provider will give you after a covered claim.
However, the base loss of value may be less than the actual lost value of your vehicle. In some states, like Georgia, insurance companies are required to prove that their calculations for base loss of value are appropriate. If the amount you would get from the 17c calculation is significantly lower than the cost of your damages, you may want to speak with an attorney about the laws in your state.
Find the adjusted value
To find the adjusted value of your vehicle, you need to identify the damage multiplier which correlates to the amount of damage your car sustained in the accident. Once you find the correct damage multiplier, you need to multiply that number by the base loss of value.
The damage multipliers are below:
|Type of Damage||Damage Multiplier|
Severe structural damage
Major structural/panel damage
Moderate structural/panel damage
Minor structural/panel damage
No structural damage
Apply the mileage multiplier
Mileage is one of the factors that impacts your car’s value. To complete the 17c formula, you must find the mileage multiplier for your vehicle and multiply that number by the adjusted value.
|Mileage Range||Mileage Multiplier|
Under 19,999 miles
20,000 - 39,999 miles
40,000 - 59,999 miles
60,000 - 79,999 miles
80,000 - 99,999 miles
More than 100,000 miles
How to file a diminished value claim
Diminished value claims are different than regular car insurance claims, and it often requires some work on your end. Here’s a basic overview of how to file a diminished value claim.
Call the insurance company
If you have diminished value coverage through your insurance, you’ll want to contact your insurance company first. Your insurance can help you figure out whether you should file a claim with them or with the at-fault driver’s insurance company.
After you’ve determined the company, call and request to file a diminished value claim. An agent will walk you through the process and let you know what paperwork and documentation is required. Make sure your insurance company knows that you're starting this process.
Calculate your car’s diminished value
When you file a diminished value claim, you are typically responsible for calculating your car’s diminished value using the 17c formula. Be sure to use the correct damage multipliers and mileage multipliers and find the accurate value of your vehicle. Any mistakes could affect the outcome of the claim.
You can also hire an independent appraiser if you believe the 17c calculation will leave you with a significant financial loss.
Wait to hear from the insurer
The final step is to submit all the paperwork and wait for a response from the insurance company. If the adjuster needs additional information, like a vehicle appraisal, they will let you know.
When should you file a diminished value claim?
Although you usually have at least two years to file a diminished value claim, you’ll most likely want to file as soon as possible. That way, you’ll recoup the costs sooner, and it will be easier to provide evidence of the accident and damage to your car.
If you can’t file a diminished value claim right away, find out how much time your state gives you to file a claim.
How long does it take to settle a diminished value claim?
The amount of time it takes to settle a diminished value claim depends on many factors, including the insurance company’s process, the type of diminished value claim, and your state. You can expect the process to take at least a few weeks, but it’s possible that the insurance company will need more than a month to settle.
Is a diminished value claim worth it?
Filing a diminished value claim can be a good option for some drivers, but it depends on the situation. Additionally, every state has different laws around diminished value claims, and who can file them.
In general, filing a diminished value claim only makes sense if you were not responsible for the accident. If you caused the crash, it’s very unlikely that your insurer will approve a diminished value claim. You might also file this type of claim if you were hit by an uninsured driver.
Diminished value claims can also be beneficial if your vehicle has a very high value with low mileage or is nearly brand-new. You might be able to recoup a larger amount of money if your claim is approved.
If your car is older or was already in poor condition, it might not be worth it to file the claim.
Frequently asked questions (FAQs)
Is diminished value negotiable?
Diminished value can be negotiated. Some insurance companies might be willing to negotiate the final diminished value claim payout, but it all depends on the specific insurer and the details of the claim. It’s easier to negotiate if you have an independent appraisal backing up your claim.
How much value does a car lose after an accident?
All cars lose value after an accident - even if caused by a hit and run, but the actual loss of value varies based on the severity of the damage, the age of the vehicle, and the type of vehicle. However, some estimates show that the resale value of a car that’s been in an accident drops by about $500.
What is a good settlement offer for a car accident?
A good settlement offer for a car accident should cover any costs incurred due to the accident, including medical bills, loss of work or employment, and vehicle damage. If you can, speak to a lawyer before accepting a settlement offer.
Is diminished value the same as depreciation?
Diminished value and depreciation are two different things. Diminished value is the difference between your car’s market value before an accident and its value after an accident once repaired. Depreciation is your vehicle’s loss in value over time, which is caused by normal wear and tear. Your car’s depreciation is determined based on its mileage, age, make, mode, and general condition.
Can a claim affect the value of a car?
A diminished value claim won’t affect the value of your car. However, if your vehicle is damaged, its value will drop even if it’s fully repaired.
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