Auto Insurance And Depreciation: Understanding Post-Accident Coverage

If your car has been in an accident, its value will decrease, even if it's been repaired. This is called diminished value. The difference in your car's market value before and after an accident can often be claimed back through insurance, depending on the circumstances. This is separate from the claim for the cost of repairs.

There are three types of diminished value claims: immediate diminished value, inherent diminished value, and repair-related diminished value.

Most insurance companies use the 17c Diminished Value Formula to determine the value of a vehicle post-accident. This involves determining the value of the car, applying a 10% cap, and then applying damage and mileage multipliers.

Immediate diminished value

If you want to file an immediate diminished value claim, you will need to contact the insurance company and request to file this type of claim. You will then need to calculate your car's diminished value using the 17c formula, which is commonly used by insurance companies. This involves determining the value of your car, applying a 10% cap to that value, and then applying damage and mileage multipliers.

It's important to note that immediate diminished value claims are rarely used outside of court systems, so you may face some challenges in filing this type of claim with an insurance company.

Inherent diminished value

The inherent diminished value of a vehicle is calculated using the 17c Diminished Value Formula, which takes into account the vehicle's market value, a 10% cap on the value, a damage multiplier, and a mileage multiplier. The formula is as follows:

Vehicle Value x 10% cap x Damage Multiplier x Mileage Multiplier = Diminished Value

For example, if a vehicle has a market value of $15,000, moderate damage to structure and panels, and 20,000 miles, the calculation would be as follows:

$15,000 x .10 = $1,500

$1,500 x .50 = $750

$750 x .80 = $600

Based on this example, the inherent diminished value of the vehicle would be $600.

It is important to note that not all insurance companies will automatically compensate for automobile depreciation, and it is the responsibility of the claimant to prove the value of the case. Additionally, state regulations may impact the ability to file a diminished value claim, with most states requiring that the other driver is at fault for the accident.

Repair-related diminished value

For instance, if the paint is repaired with a mismatched colour or if aftermarket parts are used instead of original equipment manufacturer (OEM) parts, the quality of the repair work can further depreciate the vehicle's value. This depreciation is separate from the diminished value caused by the accident itself.

When filing a repair-related diminished value claim, it is essential to prove the loss in value. This can be done by obtaining an appraisal from a certified vehicle appraiser or another recognised industry expert who can assess the vehicle's value before and after the repairs. Additionally, having photos and documents of the accident scene, repair process, and any visible discrepancies can strengthen your claim.

It is worth noting that not all insurance companies automatically compensate for automobile depreciation. Therefore, it is crucial to understand the terms and conditions of your insurance policy before filing a claim.

How to prove your claim

To prove your claim for auto depreciation, you must first understand the conditions guiding your insurance policy. Most insurance carriers do not automatically compensate for automobile depreciation, so it is important to be aware of the terms of your policy.

If your insurance policy does cover auto depreciation, you will need to file a diminished value claim. This process may vary depending on your insurance company, so be sure to check their specific requirements. However, there are some general steps you can follow to file a diminished value claim:

• Document the car's market value before and after the accident. You can use resources like the Kelley Blue Book or NADA calculator tools to determine the sales or market value of your vehicle.
• Gather evidence to prove your car's diminished value. This may include photos and documents of the accident scene and damage to your vehicle. You may also need to obtain an appraisal from a certified vehicle appraiser.
• Contact the insurer of the at-fault driver and inform them of the accident and your claim. Provide them with supporting evidence regarding the value of your vehicle and the extent of the damage. Remember, as the complainant, it is your responsibility to prove the value of your claim.
• Compare the amount the insurance company is offering with your own proposed compensation plan. If you are able to come to an agreement, they will likely require you to sign a release form. Keep in mind that once you agree to a settlement and sign the release, it is unlikely that you will be able to return for additional funds.

It is important to note that state regulations can also affect how diminished value claims are handled. Be sure to research the laws in your state to understand your rights and the specific process for filing a claim.

When to file a claim

• Timing: It is generally recommended to file a diminished value claim as soon as possible after the accident. This allows you to recoup costs sooner and ensures that you have all the necessary information about the accident and damage to your vehicle. However, it's important to note that the ideal time to file is right after you get your vehicle repaired, as the value of your vehicle could decrease the longer you wait.
• State regulations: Each state has its own statute of limitations, which specifies the time frame within which you must file a claim. For example, in North Carolina, the statute of limitations is 3 years, while in Missouri, it's 5 years. Be sure to check the regulations in your state to determine the specific time frame for filing a claim.
• Type of claim: There are two types of claims: first-party insurance claims and third-party insurance claims. A first-party insurance claim is filed when you are at fault for the accident, and it is made against your own insurance coverage. On the other hand, a third-party insurance claim is filed when you are not at fault, and it is made with the insurance provider of the other driver.
• Circumstances of the accident: If you are deemed at fault in the accident, your diminished value claim will likely be denied. In most cases, you cannot file a diminished claim against your own insurance company. However, there may be exceptions, such as if the at-fault driver is uninsured or in the case of a hit-and-run accident.
• Vehicle ownership: To file a diminished value claim, you must own the vehicle. Leased vehicles are typically not eligible for this type of claim.
• Vehicle age and mileage: The age and mileage of your vehicle can impact the success of your claim. Generally, newer vehicles with lower mileage are more likely to qualify for a diminished value claim, as they have a higher chance of experiencing a significant loss in value due to an accident.
• Previous accident history: If your vehicle has been in previous accidents, it is important to consider the extent of the previous damage. Minor previous damage may not disqualify you from filing a diminished value claim, but a significant accident history could affect your claim.
• Evidence and documentation: Before filing a claim, it is crucial to gather evidence and documentation to prove that your vehicle's value has decreased due to the accident. This can include estimates from reputable sources, such as car dealers, as well as factors such as the vehicle's make, model, mileage, accident history, age, condition before the accident, quality of repairs, and market demand.

Frequently asked questions