Does Insurance Cover Diminished Value After an Accident?

In most states, insurance companies are required to cover diminished value after an accident, but the specifics can vary. In California, for instance, the law mandates that insurers pay for diminished value if the vehicle is repaired.

Diminished value can be significant, with some vehicles losing up to 20% of their value after a crash. This is because a vehicle that's been in an accident can be perceived as being less desirable to potential buyers.

Insurance companies often use a formula to determine diminished value, which can include factors like the vehicle's make, model, and year, as well as the extent of the damage. In some cases, the formula may also take into account the vehicle's original price and its current market value.

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Diminished value is a reduction in a vehicle's worth or value, usually caused by a specific circumstance or set of circumstances.

In the context of an auto accident, diminished value is the difference between a vehicle's value before the collision and its value after collision and repair. This difference can be significant, with luxury vehicles losing more than a quarter of their value if damaged and repaired after a serious accident.

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A vehicle's resale value can be diminished significantly due to actual damage or the stigma carried by repairs. For example, if a car is worth $40,000 before a collision and only $25,000 after being damaged, its gross diminished value is $15,000.

The diminished value of a vehicle can be calculated by determining the difference between its pre-accident value and its post-accident value. This value can be used to determine the amount of compensation a vehicle owner should receive for their loss.

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Insurance companies may not always want to pay for diminished value, but most policies don't mention it. The court case American Service Center Assocs. v. Helton (DC, 2005) held that a plaintiff who repairs their vehicle should end up with a vehicle of the same market value as before the accident.

You can make a claim for diminished value against the at-fault driver's insurance company. In California, this type of claim aims to recover compensation for the lost value from the at-fault driver's insurance.

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The cost of repairs and the residual diminution in value are not the same thing. For example, if a car is worth $40,000 before a collision and only $25,000 after being damaged, its gross diminution in value is $15,000.

Most automobile insurance policies cover the costs to repair a vehicle after a collision, but only a few insurance companies have added wording to establish that they will not compensate for diminished value.

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If you believe you have grounds for a diminished value claim, you should contact an attorney to discuss your options. An attorney can help you determine whether you have a valid claim and guide you through the process.

You'll need to check your insurance policy to see if it offers coverage for diminished value, as most policies won't pay out for it, even with comprehensive or collision insurance.

To file a claim, follow these steps: contact the other driver's insurance company, check their policy, and see how much coverage you may deserve for the diminished value of your vehicle.

For another approach, see: How Much Is Personal Liability Coverage

You may also want to check if you have uninsured motorist coverage, which can help if the other driver doesn't have insurance. In Florida, about 20 percent of drivers choose not to carry adequate auto insurance, so this can be a crucial step.

Here are the key factors insurance companies consider when calculating diminished value claims:

Keep in mind that insurance companies typically pay out no more than 10 percent of the initial value of the vehicle in a diminished value claim.

There are three types of diminished value claims following a car accident. These types are often overlooked, but they can make a big difference in the compensation you receive.

One type of claim is for the stigma of the vehicle's new accident history, which can make its resale value diminish. This type of claim is available to you if the accident has affected the vehicle's market value.

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Another type of claim is for the immediate diminished value after the accident and before any repairs are made. This type of claim is also available to you if the accident has caused a reduction in the vehicle's value.

A third type of claim is for the repairs themselves, which can also diminish the value of the vehicle. This type of claim is available to you if the repairs have affected the vehicle's market value.

Here are the three types of diminished value claims in a nutshell:

These types of claims can help you recover the difference between the vehicle's market value before and after the accident.

You should contact an attorney to determine how to move forward with a diminished value claim.

An attorney can help you go over the compensation you may deserve and determine whether you have grounds for a diminished value claim.

Having an attorney on your side may increase the odds that the insurance company will offer the compensation you deserve for your losses.

An attorney can help negotiate with the insurance company, which can free you up to focus on getting your car repaired, dealing with any injuries you might have from the accident, and moving forward with your life.

In California, insurance companies use the 17c Formula to determine how much value your vehicle lost in a crash. This formula is a widely accepted method for calculating diminished value.

The formula starts with the appraisal value of your vehicle, which is the pre-accident value of your car in its original condition. This value often comes from the National Automobile Dealers Association (NADA) or Kelley Blue Book.

The appraisal value is then multiplied by 0.1, which represents the maximum diminished value that a vehicle can suffer from a crash.

A damage multiplier is used to determine the base loss of value. The damage multiplier ranges from 0 to 1, with higher numbers indicating more severe damage.

Here's a breakdown of the damage multiplier:

The resulting number is then subjected to a mileage multiplier, which takes into account how old your vehicle is and how many miles it has on it.

Here's a list of the mileage multiplier:

For example, if your vehicle has 57,000 miles on it and suffered moderate damage, the mileage multiplier would be 0.6.

Proving your case can be tricky, but it's not impossible. Some insurance companies will demand additional evidence before paying a diminished value claim, especially if the claim is high.

You can hire an independent appraiser to value your vehicle, which can provide a clear and unbiased estimate of its worth. This can be a costly option, but it's a good way to get a professional opinion.

Alternatively, you can get a sales manager at a local auto dealership to make a written estimate of what would have been offered for your vehicle, had it not been in the accident. This can give you a sense of what the market value of your vehicle is.

You can also sell the vehicle or offer it as a trade-in to determine its actual value. This can be a more straightforward way to determine the diminished value of your vehicle.

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In Florida, a diminished value claim is the formal request to an insurance company to compensate for the loss in market value of your vehicle after an accident.

A car accident can lead to substantial damage to your vehicle, sometimes requiring repairs by an experienced auto shop.

The damage can still diminish the overall value of your vehicle even after repairs, unfortunately.

If you think you have grounds for a diminished value claim after an accident in Orlando, FL, you can consult a car accident attorney to understand how diminished value may impact your right to compensation.

You can schedule a free consultation with a lawyer, such as Michael T. Gibson, P.A., Auto Justice Attorney, by calling (407)-422-4529.

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