Getting into a car accident is stressful, to say the very least. While your insurance might cover the cost of inflicted damage, it’s impossible to “repair” the diminished value of your car. A two-year-old Porsche Cayenne S that’s never been in an accident is worth $67,000. Following a collision, that same Porsche is worth only $50,000, no matter how superb its repairs were.
The diminished value paradigm may seem logical, but when it comes to managing the financial impact of an accident, especially when you’re not at fault, opportunities to recoup monetary losses are invaluable. Luckily, you have a resource to reestablish your vehicle’s worth: a diminished value claim.
What is a Diminished Value Claim?
A diminished value insurance claim recovers the monetary difference between a vehicle’s pre-accident value and its post repair value. Even if your vehicle has been repaired to its original, pristine condition, having an accident history will automatically reduce its value to prospective buyers and viewers of the vehicle’s history through Carfax or Autocheck. Severe accidents have significant a impact on the vehicle’s appraisal, particularly on luxury vehicles. The negative impact can be upwards of 30% of the wholesale price post accident. The table below demonstrates this extreme price deviation.
How Do I File a Diminished Value Claim?
A few things to consider before filing for a diminished value insurance claim. First, your insurance isn’t likely to hold your hand through the process. Second, if you caused the accident or were partially at fault, you cannot file a claim against your own policy. This is often a matter of State law and limitations within your insurance contract. Many states permit diminished value claims in the event someone hits your car, even if the guilty party is uninsured. This benefit varies widely across the U.S., so be sure to check your State’s laws.
Filing for a diminished-value claim can be tedious and successful collection requires effort throughout the process. While some vehicle owners take the filing process into their own hands, others find it significantly easier to work with an attorney, outside appraisal company, or, if applicable, their fleet management company. In the rare battle with your insurance company, a lawyer may be necessary.
The initial step when filing a claim is to document and submit proof of loss. Proving loss requires an objective appraisal of the vehicle’s value before the accident and after it’s been repaired. Following its assessment, you’ll submit the claim to the responsible party, and request for the insurance company to either compensate the diminished value or issue a settlement.
Calculating Diminished Value
So how do insurance companies measure return? To calculate diminished value, they use a formula called “17c.” You should also perform this calculation to determine the accurate valuing of your vehicle’s depreciated worth. A considerable variation between your estimates, and the insurance company’s figures may give you an upper hand when negotiating.
To calculate diminished value using the 17c formula, follow this process.
Research the market value of your vehicle at the National Automobile Dealers Association (NADA) or Kelly Blue Book (KBB) websites. Acknowledge that your insurance company will adjust this figure according to your vehicle’s mileage, upgrades, and prior damage.
Multiply the market value by .10; insurance companies typically attempt to cap the rate at 10% on the diminished value. It is possible to recoup more.
To estimate the structural damage, multiply this number (market value x .10) using the formula below. Note this excludes mechanical damage.
- x 1: severe structural damage
- x .75: major damage to structure and panels
- x .50: moderate damage to the structure and panels
- x .25: minor damage to structure and panels
- x .00: no structural damage or replaced panels
Reapply the number found in step two; multiply it with the monetary level of damage to your vehicle.
Multiply for mileage. Even though the retail value accounts for mileage in step one, insurance companies calculate the value again by multiplying based on the chart below:
- x 1: 0-19,999 miles
- x .80: 20,000-39,000 miles
- x .60: 40,000-59,999 miles
- x .40: 60,000-79,999 miles
- x .20: 80,000-99,999 miles
- x .00: 100,000+ miles
In the end, an actual loss of value to the vehicle as a result of the accident (when you are not at fault) should cover 100% of the actual loss.
Time is of the Essence
Remember that two-year-old Porsche we mentioned at the beginning of this article? The vehicle suffered a 24.5% diminution of value after full repairs. The Porsche owner agreed to an $8,000 settlement in addition to the total cost of vehicle reparations. While $8,000 seems far off from the $17,000 post-accident deficit, the timely submission of the claim allowed this owner to recoup some of his losses, without a battle, without attorney fees, and with a check in hand.
Diminished value claims are complex and commonly misunderstood. To learn more about how to rebound from an accident, seek out an expert. Attorneys, outside appraisal companies, or fleet management companies can all be excellent resources.