After any accident, there is often damage. And that damage may include loss – not only physical loss but also inherent loss in value, commonly referred to as diminished value. But what exactly is diminished value?
Diminished value can best be defined as an economic loss in the value of damaged property. In the case of an automobile, a collision can negatively affect the market value of a vehicle. This means that the value of the vehicle prior to the accident has decreased due to the fact that it has been involved in an accident.
Evaluating the diminished value amount can be challenging. Unlike actual physical damage, where the cost to repair damages is relatively concrete and finite, the amount of diminished value can be difficult to determine. Unless one actually sells or trades a vehicle and indicates the trade or sale value is “X” amount less due to the fact of the vehicle having been involved in an accident, the amount in question can be open to debate.
Diminished value takes into consideration not only the fact that an accident occurred, but also the degree of actual structural damage that was sustained, if any. Obviously, a rear bumper replacement is not the same as if the rear body panel, floor pan, and both rear frame rails were also compromised. The higher the degree of structural damage and the fewer miles on the vehicle at the time of loss, the greater the actual or perceived market value loss sustained. In contrast, the impact of the inherent loss in value typically lessens the longer an owner keeps the vehicle after an accident and as mileage increases.
So what exactly does this mean for you, the vehicle owner? Damage in comparison to the make, model year, and mileage of the vehicle can have many variables into the extent of diminished value sustained, if any. Be that as it may, diminished value is not something to be overlooked. This is especially true if you plan to trade or sell your vehicle soon. Theoretically, if a vehicle is repaired to its pre-loss condition, there really is little inherent diminished value. However, the fact remains that most consumers and dealers will not pay the same for a vehicle that was involved in a recent accident as they would for the same vehicle that has no history of damage.
If you’re involved in an accident for which you are not at fault and the other driver’s insurance carrier has paid your damage claim, there is a possibility you may have a valid claim for diminished value. As for first party claims which are between you and your insurer, the policy terms typically do not include coverage for loss in value. The one notable exception is the state of Georgia, and that is dependent on the particular policy. As always, check with your independent agent for details on your personal auto policy. I’d like to hear your thoughts on diminished value, please leave a comment below!
The policy coverages described above are in the most general terms and are subject to the actual policy exclusions and conditions. For specific coverage details and policy exclusions, refer to the policy itself or contact an independent agent.
Individual states may handle diminished value situations differently, so please consult with your independent agent for your state’s laws pertaining to diminished value.