7 Concepts to Understand on the Diminished Value Process

Within the world of insurance, the “diminished value” is an important concept to understand. To sum it up, diminished value usually occurs between motor vehicles that are involved in an accident. Having a full understanding of this idea can help you if you are ever in the unfortunate circumstance of an auto accident. Indeed, if you have ever seen those Carfax vehicle history ads on television then you probably the importance of knowing whether a vehicle has been in some sort of mishap. Here are seven concepts you need to understand regarding “diminished value” in the wake of an auto accident. 

1- Diminished value is different than depreciation. 

If a vehicle goes through depreciation, that means that it is not as valuable as time goes by and miles are added to it. In this case even if the vehicle is fixed and replaced with manufacturer parts it still will not be worth as much. However, depreciation is not the same as diminished value. One example of diminished value in actionwould be when you are trying to sell a car. Let’s say, for example, that thepresent value of the car is $20,000 with no accidents. However, what if the vehicle was involved in an accident? Even if the auto was taken to the best mechanic possible who only used manufacturer spare parts to restore the car,this vehicle would now be at a lower value, probably even $17000 or less. In summary, the “depreciated” value of the car is $20,000, but because it was involved in an accident the real value of the car is even less than that. 

2- Insurance companies have a specific formula they utilize to determine diminished value. 

As a general rule car insurance companies in the United States will a diminished value calculation called 17c in order to determine the value of the repaired vehicle. This usually entails the original value of the car and then multiplying it by 10%. For instance, on a $20,000 vehicle we have a figure of $2,000. However, we are not done yet. Next, we have to apply a base multiplier that can go from 0 to 1.00.0 would mean there is no structural damage, and 1 would mean severe structural damage, such as a frame that was repaired. The next step in the process would be for an insurance company to file a mileage multiplier. This essentially means that the mileage will also affect the value after it has been wrecked.For example, a vehicle with 0 – 19,999 miles will have a mileage multiplier of 1.00 while one with 60,000 would be a bit lower and one with more than 100,000 would have a multiplier of 0.00. 

3- You will have a need to fully understand the diminished value formula in action. 

Here is an example to go by: let’s say you have a vehicle that is worth $20,000. However, it has been in an accident that the insurance has deemed as “moderate damage to structure and panels.” Your vehicle has 75,000 miles, so the formula in this case would be$2,000 (10 percent) x .50 (moderate structure damage) x .40 (75,000 miles) fora total depreciated value of $400. 

4- You will need to know when and how to file a diminished value claim. 

Generally, you should file a diminished value claim for your vehicle if you were involved in an accident where the other driver is at-fault. This would include every state except Michigan where the driver did not have any insurance at all. Of course, time is of the essence as many states have statutes of limitations based on property damage claims. 

5- You will need to be aware of the process for filing this claim. 

First of all, you will usually have to contact the other party’s insurance company and go through their process for filing a diminished value claim. Be aware that there are some insurance companies that will not honor the request. In that case, you definitely should consider small claims court. 

6- Be aware that there area lot of lawyers and dealers who don’t care for the 17c formula. 

If you utilize the 17c for damage to your vehicle and think it is worse than the calculated damage, there is nothing wrong with getting a second opinion. 

7- Be aware of your other options. 

In relation to the tip above, you do have other options. Normally, people use the NADA for a diminished value report.However, if you think your diminished is higher, there are plenty of third-party sources you can utilize to help you recover the most financial compensation possible for your damaged vehicle. Persistence always pays off in this case.

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