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Is Diminished Value the Same as Depreciation?

First of all, it is important to understand what a diminished value claim exactly is. The diminished value of a vehicle or your car basically means the difference between the market price of your car before the accident and after the accident.

The damage to your car due to the accident would obviously have affected the value of the car to a great extent. Even if you get the car properly repaired, it still won't hold the same value it held before the accident.

Hence, if you try to sell the car in the future, you'll face hurdles while doing so. You might even get less for the car, and potential buyers will consider the accident and damages as well.

In this case, you might file a diminished value claim so you could help cover the cost of the car's value. However, it is important to understand that this isn't always guaranteed, but it does pay off if done the right way.

Difference between diminished value and depreciation

It is important to understand that diminished value and depreciation are two different things. Depreciation basically refers to the drop in the car's value over time, and even if the car goes through a series of repairs with the original manufacturer parts, the value still won't be the same. It will definitely be less or depreciate over time than it was before the accident.

How to figure out whether or not you can file a diminished value claim?

It isn't that hard to figure out when you can or can't file a diminished value claim. For e.g., if someone hits you, and you have collision insurance, then you would file a claim. However, you would need comprehensive insurance in case a tree falls on your car.

In both these cases, you can file a claim. However, the diminished value claims aren't always the best way to go, and one needs to consider the factors that can affect your decision to file a claim or not. Here are a few of those factors:

Where you live

In many states, there aren't any laws that say that an insurance company is required to pay for the diminished value claims. Hence, it won't mean that your claim wouldn't be approved, but you might not stand a chance of winning it.

Make sure you check out the laws in the state you currently reside in, as well as calculate diminished value claim South Carolina.

Your insurance company and its rules

Many insurance companies have rules and regulations of their own about the diminished value claims. They might tell you if they covered that in the legal fine print of the policy.

Make sure you go through the print and ask someone from the insurance company if they cover the diminished value claims. Many of the insurance companies even charge you extra for the coverage of the diminished value claims.

Pre-accident value of the car

Before the accident or any damage to your car, it is important to know about the mileage of the car as well as how old it is. If the car is really old and of high mileage, then there is a chance that you might not get anything from the diminished value claim.

This is because your car might not be worth it, and the accident might lead to more drop in the value, which makes your car worth really less or not eligible enough for the diminished value claim.

Who was at fault for the car damage

This is another factor that can help you decide whether or not you want to file a diminished value claim. If someone else caused the accident or someone else hit your cat, then it is more understandable to file the claim.

In this case, you can work out something with the person at fault and get a payout through the driver's insurance company. Moreover, if the other person was driving without a license, then there is a good chance for you to file a claim with your insurance.

However, the situation changes if you are at fault. If you caused the accident, intentionally or unintentionally, then your chances of filing a successful diminished value claim with your own insurance might be really low. However, it still is worth the shot.

How to file a diminished value claim?

In case you are involved in an accident, and then you file a regular claim for injuries or physical damages to yourself and the car, then it might be a pretty straightforward situation.

However, it is important for you to contact the insurance company and tell them everything that happened.

Make sure you answer them and file any documents they require. However, there are a few complications that arise with the diminished value claims.

You would need to prove how much your car values and how much value it has lost after the accident whenever you file the claim. There are two major ways through which you can do so:

Getting an appraisal

This is one of the best and most recommended ways through which you can put a said amount on the value you have lost since your car has been maintained and gone through a number of repairs. This will get you a professional appraisal.

This appraisal is more considerable when you get it in writing, and make sure you have the appraiser specify the decrease in your car's value and how much worth it is now as a result of the accident. Then it can be submitted to the insurance company to prove the situation, and then you can file the claim.

17c rule

This is another way through which you can file a diminished value claim. This rule is usually used by the insurers, and they use it to estimate the dollar amount of the diminished value claim. The process has many steps:

1. First of all, it includes checking the NADA value of the car.
This is to establish the worth of the car according to the NADA estimate.

2. After this, you are required to calculate the 10 percent base loss rate.
In this, you multiply the car’s value by 0.10. This will help set the maximum limit on the diminished value claim.

3. The third step of the 17c rule is applying a damage multiplier.
In this, you will be taking into account all the damages to your vehicle, and then according to the 17c rule, you will see multiple base loss rates by one of the numbers given below. These will depend on how badly your vehicle is damaged.

  • 1.00 – Severe damage to the structure of the car
  • 0.75 – Major damage to the structure and panels
  • 0.50 – Normal or moderate damage to the structure and panels
  • 0.25 – Minor or fewer damages to the structure or panels
  • No damage at all.

Keeping these numbers into consideration, you can say that if your car has suffered major damage to the left side of it or the passenger door panel has been damaged, then you can count it as major damage. In this case, just multiply the loss rate by 0.75 to get the value.

4. The fourth step is to apply a mileage multiplier.
This helps take the estimate one level further, and then you are required to multiply it according to how many miles the vehicle has. Then you're supposed to consider the numbers assigned to the following ranges of mileage.

  • for 0-19,999 miles
  • 0.80 for 20,000-39999 miles
  • 0.60 for 40,000-59999 miles
  • 0.20 for 80,000 -99,999 miles
  • for 100,000 miles or more than that.

The 17c rule is criticized for this part because the NADA takes the car's mileage into account already when it calculates the value.

Filing the diminished value claim

The final step which you have to undergo is to submit the signed paperwork to the insurance company and then confirm filing the claim.

It is important to understand that hassling to file a diminishing value claim is very time-consuming, but you can consider using help from many sources to walk you through the whole procedure.

There are many companies that you can hire so they can help you out throughout the whole process, and they might charge a price.

Just in case your insurance company doesn't accept the diminished value claim, you have to gather the paperwork that proves you are owed money and then take it to court.

It is important to understand that filing a diminished value claim isn’t easy even though it has straightforward rules and regulations; nothing is as easy as it seems. You would have to understand that it isn’t as easy as regular insurance claims.

Conclusion

Conclusively, it is extremely important for people to understand the difference between the diminished value and the depreciation of a vehicle. Diminished value means one can file a diminishing value claim to recover the lost value of the vehicle.

It isn't as easy as it sounds, as the insurance company is in power to reject or accept the claim, or else you might have to take your case to court. Diminishing value needs to be calculated to fully understand how much value your car has lost.

This can be calculated by knowing the value of your car before the accident and then finding out the value of the car after the accident, damages, and repairs. Everyone knows repairs automatically cause the car's value to diminish. Hence, a diminishing value claim is in order, especially if the accident was someone else fault.

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