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Can You Get Compensation for Diminished Value on Your Car?

By on March 9, 2014 in Money

Can You Get Compensation for Diminished Value on Your Car?You just got into an accident with your car. Before the accident, your car is worth $20,000; you had fully repaired, so it should still be worth $20,000, right?

Unfortunately, probably not.

There’s a creeping marauder in the automotive world known as diminished value that usually guarantees that your car will never be worth quite as much after an accident as it was before – repair work be damned.

What is diminished value?

Diminished value is the lost value of a car as a result of an accident. Once a car is involved in an accident, particularly one that involves extensive damage, the car is never worth as much as it would have been had the accident not occurred.

As an example, a car worth $20,000 before an accident may be worth only $18,000 afterward – even if it has been fully repaired.

Part of the reason for this is perception. If a car is known to have been involved in an accident, people are not willing to pay as much for it as they would if the accident had not happened. How will they even know? A good mechanic or car expert can detect an accident repair pretty easily. And if one is not available, there’s always a Carfax report. (Carfax is an automotive information depository that reports on the history of a vehicle in much the same way credit reports track the credit behavior of individuals.)

The other telltale sign is that no matter how good a repair job is, it will never match up fully with the car’s original condition. It’s the difference between factory assembly, and reassembling after the fact. The car will just never look quite the same. And depending upon the quality of the repair job, the difference could be either very subtle or very obvious.

When you can get compensation for diminished value

Compensation for diminished value comes from the insurance companies. But since it involves paying a claim – or in this case an increased claim – the insurance companies are understandably reluctant to even recognize it, let alone pay for it.

You can sometimes get compensation for diminished value if the accident was the fault of the other party, in which case you will pursue payment from the other person’s insurance company. It gets more complicated, though it isn’t impossible, to obtain compensation in either a no-fault accident, or one involving an uninsured motorist.

Much will depend on the laws in your state, and on the common practices within the insurance industry in your state. It will be easier to obtain compensation in some states than others, so you’ll have to look into the specific laws of your state to determine what your chances of obtaining compensation will be.

And when you can’t

If you’re involved in an accident that is determined to be your fault, it can be close to impossible to get compensation for diminished value. Insurance policies are typically written specifically to exclude this type of reimbursement.

But once again, depending upon the laws and practices in your state, and upon the specific wording of your insurance contract in general, you may be able to bring legal action against your insurance company in order to obtain compensation.

You would do well to consult with an attorney in your area who specializes in diminished value cases. The problem you will have here however is that the amount of money involved in these claims is usually so small that attorneys are reluctant to even get involved. Be that as it may, you may be able get an attorney opinion as to what your best course of action is, and then consider filing action either with the courts, or with your state’s insurance commissioner.

It’s a tough case to prove if your claim is denied

Whatever the laws and practices are in your state, it will be tough to prove your case if your claim for compensation is denied.

A big part of the problem is in determining the change in value before and after the accident. You can obtain an estimate of value from web-based sources such as Kelly Blue Book, but that will not help you in getting a reasonable estimate of value for the vehicle after the accident.

You can start the Kelly blue book value – or any other authoritative source you can cite – then you will have to show how and why the value of the car is diminished by the accident.

You can start by getting a copy of the Carfax report on your vehicle. You’ll have to wait a month or two after the accident repair for doing this so that it will have time to make it to the report. This will establish the fact that you had an accident and it is showing publicly. After that, you’ll probably want to talk to a car dealer about the value of your vehicle and how much they would be willing to give you in a trade-in. In fact, you’ll probably need the opinions of at least two or three dealers in order to do that.

Once you have established your before and after values, you can begin pursuing your case to obtain compensation. The process however is highly subjective, especially when it has to do with car values. In the end, you may be fighting for just a couple thousand dollars, or even just a few hundred. The amount of the claim will determine whether or not to pursue it, and how far you go if you do.

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