What Is Diminished Value?
A simple definition of diminished value is the difference between a vehicle’s market value before the harm and its lesser value after the repairs have been made. Diminished value is different than the usual car depreciation rate that happens as a vehicle ages and gradually loses value over time.
Diminished value is an additional form of depreciation resulting from the damage history.
What Is a Diminished Value Claim?
A diminished value claim is intended to make up the difference between the car’s value before the accident and its lesser value after the repairs have been made. Depending on the circumstances, you may be able to file a diminished value claim to help you recover your car’s loss in value so you’re made whole after the accident.
As a rule of thumb, you can only make a diminished value claim when the accident was not your fault.
A notable exception is in the state of Georgia where you can claim diminished value on both at-fault accidents and not at-fault accidents. Georgia law requires that insurance companies assess diminished value on all auto claims.
Typically, if the accident wasn’t your fault, you would file a diminished value claim with the at-fault driver’s insurance company – it’s covered under their property damage liability.
You may be wondering why you can’t claim diminished value under your own insurance policy. Most people’s insurance policies have an exclusion for diminished value that says it is not covered. Collision and comprehensive coverage pays only the amount necessary to repair or replace the damaged vehicle and diminished value is not covered.
Do I Qualify to Make Claim for Diminished Value?
Use the following checklist to help determine if you qualify. You may be able to file a diminished value claim if the following applies.
- Vehicle is newer with low mileage (typically less than 7 years old with under 100,000 miles)
- Vehicle was in good condition prior to the accident
- Vehicle does not have a previous accident history, or if it was in an accident, the previous damage was minor
- Another driver was at-fault for the accident
- The vehicle is not leased
How is Diminished Value Calculated
There are no state laws or insurance regulations that specify how to calculate diminished value. The laws only define what you’re legally entitled to collect, but they don’t offer any specific guidance on how to calculate diminished value.
In most states, case law defines diminished value in two ways.
The general rule (immediate diminished value/gross diminished value): The difference between its market value immediately before and immediately after the collision (before repairs are made).
The alternative rule (inherent diminished value/residual diminished value): The difference between a vehicle’s market value before the harm and its lesser value after the repairs have been made. When the value of a damaged and repaired vehicle is less than the vehicle’s worth before the damage, you may recover both the cost of repairs and the residual diminished value after repair.
Other methods used to calculate diminished value are formula’s, algorithms, online diminished value calculators, price guides, car dealers, auction data, independent diminished value appraisals, etc. To properly calculate diminished value, the market for your specific vehicle should be researched and measured. It’s recommended to engage the services of an independent appraisal company that specializes in diminished value claims. DVCHECK can help!
How to Prove Your Diminished Value Claim?
If you’ve been in a car accident, it’s up to you to prove your diminished value claim. Most people will turn to car dealers and licensed auto appraisers for documentation. Getting documentation through car dealers can be good supplemental evidence, however, it’s not the kind of documentation that you want as the foundation of your claim. The best way to prove your claim is to get a diminished value appraisal prepared by a licensed independent appraiser that is an expert in diminished value.
An independent appraiser is disinterested in the outcome of your claim, they are unbiased, and they aren’t trying to make a profit by selling your car. They can also be a valuable expert witness if you ever need to take legal action.
Proving a diminished value claim is serious business and not all diminished value appraisal reports are created equal. There are a lot of poor-quality appraisals that contain unsupported opinions or automated software reports offered for sale online.
Insurance companies are looking for a high-quality independent appraisal performed by an industry expert with the highest qualifications and experience. They want appraisals that contain market data and facts.
That’s exactly what you’ll get with a DVCHECK appraisal. The insurance company will see a report created by a licensed appraiser who is loaded with credentials. An appraisal that contains real market data and facts to support your diminished value claim.
We’ll guide you through the claim process, help you overcome the insurance company defenses, and help you build up your documentation so you can be successful.
Pick the wrong appraisal company or submit the wrong documentation and you could be in for a long, drawn-out process.
How to File a Diminished Value Claim?
If the accident wasn't your fault, you can file a diminished value claim in most states. You’ll need to submit your documentation and demand letter to the at-fault driver's insurance company.
You can do this via mail or email. The demand letter should specify the exact amount of diminished value that you’re claiming and set a time frame for a response.
You may be wondering when to file a diminished value claim. The ideal time is right after you get your vehicle repaired.
Every state has a statute of limitations (amount of time you have to make the claim). In most states, you have at least two years to file a diminished value claim, but you don’t want to wait until the last minute.
The sooner you file your diminished value claim, the better.
How Long Does It Take to Settle a Diminished Value Claim?
Most diminished value claims will take anywhere from two to six weeks to settle. Some claims will settle even quicker.
The more you follow up with the insurance company, the quicker the process will go.
If your claim is dragging on and the insurance company isn’t being responsive, try filing a complaint with the department of insurance. Every state has an insurance department that handles complaints and regulates the insurance industry.
The department of insurance can hold them accountable and get them to respond to your claim.
What if Your Diminished Value Claim Gets Denied or Under Paid?
If your diminished value claim is denied or if you receive a low offer, you’ll first want to negotiate.
When you receive a low offer, you should make a counteroffer. Sometimes by coming down on your initial demand, the insurance company will increase their offer as a gesture of good faith.
Haggle and negotiate until they get firm with their offer. At that point, you’re most likely at the top end of their settlement range.
If the offer is still too low or if your claim is still being denied, you’ll need to take legal action. Most of the time you can take the at-fault driver to small claims court. Let the judge decide what is fair and then the insurance company will owe you whatever the judge awards you.