One of the things that many drivers have questions about is the “Diminished Value” of a car. Sometimes, a concept like “Diminished Value” is a little hard to understand, but it is important to know in the case of a car accident. Understanding Diminished Value claims can help you get a better settlement on your insurance claim. Below is some important information about Diminished Value and what to keep in mind when filing an insurance claim.
What is Diminished Value?
Once there is damage to property, the property incurs what is called Diminished Value. This is true for every type of property but is especially relevant to cars. The best way to explain Diminished Value is through an example. Say a car dealer shows you two cars that are the same make, model, and year. These cars are both valued the same but when you ask the car dealer if there are any differences between them, he tells you that one has been in a car accident. After knowing this information, do you think that the cars are worth the same price?
You probably said no to the question above and if you did, then you understand the concept of “Diminished Value”. The truth is that after a car is in an accident, it is worth less in value than a car that is the same make and model no matter how much repair is done on it. This is for a multitude of reasons, but one of the main ones is that the car will never truly be in the same condition as it was prior to being in an accident.
How Does Diminished Value Affect My Claim?
When you file a claim, you want the allocated money from the insurance company to cover the full expenses of your losses. Because of a Diminished Value on a car, you have to make sure that the insurance company is giving you the full amount to cover the Diminished Value. Once again, this is best explained through an example. Say you get into an accident and before the accident, your car was worth $15,000. After the accident, the car is now worth $9000 but the insurance company delivering you your payout only wants to give you $4000 for your car. They still owe you $5000 to make up the nine thousand value.
One option you have is to file a Diminished Value Claim. This is when you file a claim requesting the difference in value that your car had before the accident and the value it has after the repairs. In the example above, the value you would be entitled to with a Diminished Value Claim would be $5000. The only problem with this is that states and insurance companies vary on if and how they pay Diminished Value claims. It’s important to know where your insurance company stands on this issue because it could cost you money in the long run.
An important thing to keep in mind when filing a claim after an accident is the car’s Diminished Value. No matter how well a car is repaired after an accident, it will never be valued the same as a car that has never been in an accident (check out the blog on how to protect you further on Diminished Value). If you are in an accident, one way to salvage your losses is to file a Diminished Value claim if your insurance company allows it.
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