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Diminished Value

What is Diminished Value?

Simply put, Diminished Value is the difference between the market value of a vehicle prior to a collision or other damage, and its value after. Ask yourself, if two identical vehicles are for sale with identical mileage, options, and condition, one was damaged and repaired and one that was never damaged, which car is worth more?

What is a Betterment Charge?

The goal of insurance is to restore you to your pre-loss state — no better and no worse. The insurance policy proves the concept of Diminished Value through its use of depreciation and the betterment clause in repairing your car. Various parts of your vehicle wear at different rates through regular use. When a part requires replacement because of damage in a collision through no fault of your own, the insurance company uses a depreciation formula to determine the value of the parts that need replacing.

Replacing a worn part (such as tires, brakes, and mufflers) with a new part is known as betterment. The difference between the insurance company’s depreciated value and the replacement cost is charged to you and called a betterment charge. This is the reason why the insurance company believes it can use aftermarket parts and junk yard parts when repairing your car without it affecting the value of your vehicle. However, Diminished Value will affect the value of your car when you try to sell it or trade it in.

Which vehicle would you buy?

One had 60% damage and was repaired. The other has never been in an accident.

Collision damage causes severe loss of value at the time of impact! Repairs will restore some, but not all value depending on the quality of the repair work. However, all cars will suffer loss in value to some extent, depending of course on its pre-loss value, mileage, general condition, options and extent of damage.

Compounding this problem is that many states require that damage be disclosed at trade-in or sale. Furthermore, there are lemon laws in most states that are written to protect unsuspecting consumers from buying unsafe cars, flooded cars, and rebuilt total losses. The market for used cars and trucks simply does not support collision damaged vehicles. In fact, in the wholesale auto dealer business, vehicles with structural and or frame damage must be disclosed and are auctioned separately.

Don’t be fooled into thinking your vehicle is worth the same after an accident, even if it is repaired perfectly! Just ask your insurance company about depreciation and betterment they apply to the repair process and how much additional depreciation they would take if your car happens to get in another accident.

You have the right to collect the Diminished Value.


Know Your Rights

As the owner of the vehicle, it is your right to choose where and how your collision damaged vehicle is repaired. According to a federal decision called the 1963 Consent Decree (www.consentdecree.com), the insurance company cannot refer, suggest or recommend a shop unless you specifically ask for a recommendation. It is illegal for the insurers to tell you which shop you must use for the repairs.

Do not short change yourself

You have had the misfortune of being in an accident. Most people are trying to save money. Paying for an appraisal under the right conditions is the best investment you can make to prevent you from losing your investment in your car. The insurance company always invests in an estimate or appraisal. You should too.

The insurance claims adjuster represents the insurance company‘s interests
Insurance claims adjusters are trained professionals taught to use techniques to minimize the claim and save the insurance company money. Their job is to produce an estimate or an appraisal according to insurance standards that supports their numbers. Trying to settle the claim on your own and without your own appraisal puts you at a severe disadvantage. Unless you are an attorney or an adjuster, get help from General Auto Check.

The problem with undervaluing your claim

If you do not understand the full value of your Diminished Value claim, you will have a self-fulfilling loss of value. For example, if your Diminished Value is actually worth $6,000, but you submit a claim for $4,000, then you have given up 33% of the potential value. That is a $2,000 mistake. This tells the insurance company that you do not know what you are doing. Online Diminished Value calculators often undervalue claims. A properly prepared Diminished Value claim takes into account the age, mileage, make and model of your car, the car history, and where you live and presents the information in a format where the insurance company will recognize that you have enough information to go to court and they have a high probability of losing if they do not settle.

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