Understanding Diminshed Value Payments
Once a car is damaged in an accident, it will truly never be as “good as new,” because of the diminished value caused by the wreck. Once a car is involved in a collision, although auto insurance may cover the repairs of the vehicle, the car will never be worth its full value again because repair work for an accident lowers the value of your vehicle. Your car will now have a permanent history of being wrecked, and consumers will not be willing to pay full price for a previously damaged vehicle, no matter how well the repair job was done.
Calculating Diminished Values
Typically the decline in value is 18% between thepre-crash and post-crash estimate. That difference is officially called the “diminished value.”Whether or not your auto insurance company will cover the difference of the diminished value payments depends on local state laws. In most states, the insurance coverage willguarantee that a car will be repaired to pre-accident condition, and unless state courts mandate otherwise, the diminished loss value is your loss to deal with.
No Laws Requiring Diminished Value Payments from Insurers
Although consumer advocates fight insurance companies to pay for a diminished value payment to policyholders (assuming their vehicle is restored and repaired), not all states agree it should happen. Because of the different views between policyholders, consumer advocates and insurance providers on this matter, there are a plethora of court cases battling out the rights in question.
45 states have language on the books limiting the coverage provided by the insurance coverage to exclude diminished value from the realm of their responsibility. TheInsurance Services Office (ISO) composed policy language that officially releases insurers from making diminished value payments in physical-damage coverage claims. OnlyGeorgia, Hawaii, Kansas and Maryland have not adopted this language, while Massachusetts does not use this language but followed an advisory committees policy ensuring no diminished value payments.
The only way to possibly claim a diminished value payment is if someone else hits you and is found in fault for the accident. Their insurance will take effect to cover your losses, and since you do not have a direct contact with their insurance provider, the language preventing you from claiming diminished value payments will not apply to you. This process is alsocalled a third-party claim.