You probably already know that your new car's value diminishes immediately after you drive it off the car lot. But what if its worth is weakened because it needs repairs after an accident?
What is diminished value?
The at-fault driver's insurance company is required to return your car to its pre-accident condition. Yet even if your car is completely repaired, it may lose value after it has been in an accident -- because no matter how meticulously a repair shop tries to restore your vehicle to its original condition, it will never really be the same. In other words, it has "diminished value." According to the Insurance Consumer Advocate Network (iCAN), diminished value refers to the difference between the car's book value before the accident and its book value after the accident and repairs.
It may not matter to you right now if your car is worth $1,000 less, as long as it runs. But diminished value could come back to haunt you if you want to sell it.
Even if a body shop does an impeccable job fixing your car, it will always have "evidence of repairs," which could make it harder to sell, according to Ramji and Associates, a Texas law firm that specializes in diminished value cases. State laws require sellers to disclose a vehicle's accident history, meaning that buyers will expect to pay less for a repaired car than they would for an undamaged car of the same make and model.
Moreover, a vehicle that has been repaired after an accident is more difficult for dealers to sell because consumers may be concerned about underlying damage. So you might not get the same trade-in value for a vehicle that has been in an accident that you would from one that has not.
Diminished value claims
You may be able to recoup some of your losses by filing a diminished value claim. In essence, filing a diminished value claim involves asking an insurer to pay the difference between what your car was worth before the repairs and what it's worth after the repairs.
If the at-fault party's insurance company owes you for vehicle damage repairs, it owes you for the diminished value as well, according to iCan. If the person who hit you doesn't have insurance, you can use your uninsured motorist coverage, if you have it. iCan suggests calling on a qualified diminished value claim practitioner to help guide you through the obstacles that insurance companies will throw in your way.
If you are not at fault for an accident and you're filing a claim under the other driver's policy, you will need to prove that your vehicle's value will decrease after the repairs are completed, according to the Washington State Office of the Insurance Commissioner.
If you were the at-fault driver, however, filing a diminished value claim may be more difficult. Carefully read your auto insurance policy to find out whether diminished value claims are excluded. If not, you may be able to receive compensation from your own insurer.
However, if you expect reimbursement, you'll have to jump through a lot of hoops. State laws vary -- in some states, insurers do owe their policyholders diminished value compensation, even if they were at fault. In other states, they do not, according to iCan.
Given the complexity of diminished value claims and the variance in state laws, an attorney might be necessary. If there's no experienced diminished value attorney involved, insurance adjusters may refuse to compensate you or try to convince you to accept a settlement far below your original claim, according to Griffin Law Firm, an Atlanta firm that specializes in personal injury and diminished value cases. In most cases, legal help will cost you a portion of the settlement you get from the insurer.