If you’re an experienced driver, you’ve likely dealt with car insurance companies before. Here’s an aspect of auto insurance that many people aren’t familiar with that can come into play after a collision. If you own a vehicle, you’ll want to know about diminished value claims in case you’re ever in an accident.
What is a diminished value claim?
An accident can reduce the value of an automobile even if the vehicle is fully repaired. In fact, services like CarFax may make it difficult to sell a car that has been in a collision. The CarFax website advises buyers not to waste their time on vehicles with “less than desirable history.” People simply aren’t willing to pay full price for a car that has been in a crash. This can be problematic for car owners who are in accidents but have their vehicles fully repaired. For that reason, if someone hits your car, their insurance company may compensate you for your vehicle’s diminished value.
For example, say that you own a 2009 Ford F-150 with resale value of $8,000. If your truck was hit by another vehicle, and you spent $1,000 getting it fully repaired, its resale value may nonetheless be permanently reduced. Say its new market value was $6,000 because of the accident. You’ve then suffered a lost in terms of the wealth you hold in the property. In that case, you could be entitled to recover not just the cost of the repairs but also $2,000 in diminished value, the difference between the prior and current market prices. The purpose of insurance is to reimburse your losses and make you whole, at least in theory.
Insurance companies may underestimate diminished value
In practice, insurance companies are notorious for underestimating diminished value in order to protect their bottom line. They often use arbitrary formulas without basis in the law just because they wish to keep claims low. In the Ford F-150 example above, an insurance company may have considered diminished value very differently from the true economic loss. Many insurance companies cap diminished value to 10% of the value of the automobile in their initial quotes, so the insurer may tell you your diminished value claim is worth $800 or even less. They often further reduce that number based upon the mileage and condition of the vehicle, often ending up with estimates that don’t come near the true loss. These companies can be very convincing to people who don’t deal with them on a regular basis. That’s why it’s so important to talk to a lawyer.
Remember that insurance companies seek first and foremost to protect their bottom line. If you’re in an accident, first follow our four steps to protect yourself. Then, when you have to negotiate with insurance companies and make sure your rights are taken care of, don’t go through it alone. Contact The Rhine Law Firm, LLC for an attorney who has experience dealing with insurers and who will protect your rights and interests throughout the process.