How to File a Diminished Value Claim?
Everything you need to know about the ins and outs of a Diminished Value Claim.
Insurance is essentially a backup for you when things go south. It helps you pay off the damages if you have been in an accident. It also assists you in paying for any injuries you might have sustained from the accident.
However, not many people realise that your car’s value might be brought down from all the repairs. In cases like this, you can file a Diminished Value Claim. But what exactly is that?
What is a Diminished Value Claim?
According to the diminished value definition, it’s the difference in the market value of your car before and after the accident.
Regardless of the repairs fixing everything after the accident, the damage your car sustained can significantly bring down the value of it. So if you plan on selling your car, you will get less than the market price for it as potential buyers will see its value as depreciated.
In some cases, you might not have the repairs your car needs. The paint might not match or the original parts cannot be found. This leads to a decrease in the value.
In cases like these, you will be able to file a diminished value claim which will then help you cover the loss in your car’s value.
Diminished vs. Depreciation
Diminished value is not the same as depreciation. Depreciation is the drop of value of your car over time. Even if your car does not have any repairs or still has the original parts, the value will drop over time regardless.
How Does Diminished Value Work?
To determine whether or not you can file a claim, there are a couple of factors you need to look at first.
Although other claims in car insurance are straight to the point, diminished value requires a bit more work on your part. You can file collision coverage if someone hits you or if a tree falls on your car, you can file for comprehensive coverage. But to determine whether a diminished value claim can be filed, you have to look at the following factors:
- Where you live.
Some states do not have diminished value claim as a requirement. However, this does not mean your claim would not be approved. It just means you might have a slimmer chance of getting it approved.
- Your insurance company.
Some insurance companies do not cover a diminished value claim. It can be written on your policy which is why it is important to look around before deciding on one insurance company to purchase your auto insurance policy from.
Moreover, some companies may provide diminished value coverage but ask you to pay extra for it. Again, it is important to look around so you can find the best rates possible.
- Your car’s value before the accident.
If you already drive an older vehicle or a car that has a high mile-age, it is likely that your insurance company might not go through the trouble of paying you the diminished value. For example, your car was already at $1900 and was diminished to $1800 after the accident and repairs, your insurance company will not get into the hassle of paying for such a small amount.
- Whose fault the accident was.
The last thing that will determine whether or not you can file a diminished value claim is who was at fault for the accident.
If it wasn’t you at fault, you can file for diminished value with your insurance company and they will coordinate with the other person’s insurance company and get you a payout.
However, if you were at fault, you are less likely to successfully file a claim with your own insurance company.
If the person at fault was uninsured, you can still file a claim with your insurance company if you carry the underinsured motorist coverage.
How to File a Diminished Value Claim?
Filing a diminished value claim is not as easy as filing for damages or injuries that only requires you to answer a couple of questions and file your claim. With diminished value claims, it is a bit technical. The first thing to do is to determine how far the value of your car has diminished.
How do I Determine the Diminished Value of my Car?
- Get an appraisal.
The best way to find out how much value your car has lost is through a professional appraisal. You should get your appraiser to put it in writing how less your car is worth now as a direct result from the accident. You will then have to submit this document to your insurance company as proof with your diminished value claim.
- The 17c rule.
This is commonly used by insurers and is a several step rule that helps calculate the diminished value of a car. For this rule, you are required to:
- Check the NADA value. This will determine how much the car is worth according to NADA estimates.
- Calculate a 10 percent base loss rate. This will set a maximum limit on the diminished value claim.
- Apply a damage multiplier. This will take into account how much damage the vehicle has.
- Apply a mileage multiplier. This will tell you how many miles the vehicle has as high-mileage cars are not accepted for a diminished value claim.
- Submit the paperwork to the insurance company and file the claim.
What do you need to know?
Now that you know how to file a diminished value claim, you will agree it’s not as simple as filing for other insurance claims. This has a more complex process and often times, may leave you without a payout. However, if you are driving a new car or an expensive car, it might benefit you to go through the hassle of filing a diminished value claim.