Does Car Insurance Cover Diminished Value After an Automobile Accident?

Insurance is designed to mitigate financial risks, such as those associated with accidents. However, the financial compensation from an insurance company is typically limited to the Actual Cash Value (ACV) of your vehicle before the accident. The ACV is essentially the value of your car if it were to be placed on your front lawn with a 'FOR SALE' sign. This value excludes additional expenses such as dealership add-ons, lighting upgrades, and sales commissions.

Understanding Diminished Value

Diminished value refers to the decrease in the market value of a vehicle following an accident, even if the car has been repaired. Unfortunately, in most cases, the insurance company does not cover this kind of loss, unless you have a very specialized and high-quality policy with an endorsement. Additionally, you can opt for a gap insurance policy to cover the difference between the car's depreciated value and what you owe on a loan.

Insurance Claim Process

When you file a claim for an accident, the insurance company will send out an adjuster to evaluate the damage. They will also gather information about the other driver, check if the car can be repaired, and determine if you have full coverage. If the car is older, they may evaluate the blue book value and offer a settlement in that range. However, usually, they won’t cover full coverage on cars over 7 years old unless the car is financed.

For an older car, the insurance company may offer a settlement based on the current value or the trade-in value, which is often less than the ACV. If the car is totalled, the dealer will get the money from the settlement.

The Role of Legal Representation

Without legal representation, the insurance company may offer you the least possible amount. However, hiring a lawyer can significantly increase your compensation. This is because a lawyer can negotiate on your behalf and ensure that you receive a fair settlement, both in terms of the monetary value of the vehicle and your health.

Even if the car is damaged, the chances are that you will also suffer from physical injuries. Immediate symptoms might be hard to detect, but they can manifest over time. After a series of accidents (in my case, three in a month and a half), I received a few hundred dollars in settlement. Soon after, my back seized, leading to a reliance on pain medication for the next 20 years. This experience is a stark reminder of the importance of taking all potential health impacts into account before accepting a settlement.

Claiming for Diminished Value

The insurance company may be reluctant to compensate you for diminished value. In most cases, the burden of proof rests with you. To substantiate a claim for diminished value, you would need to sell the car. A properly repaired vehicle should not experience a decrease in value unless the accident is reflected in Carfax reports.

It’s important to note that Carfax does not record all accidents and damages; the information is limited to accidents for which the owner requests a report. Therefore, a clear repair history can help bolster your claim.

Proactive Measures and Tips

Understand the terms of your insurance policy, particularly regarding collision coverage and diminished value.

Keep detailed records of all repairs and maintain a comprehensive Carfax report to support your claim.

Consider consulting with a car valuation expert or an appraiser to provide a more accurate assessment of your vehicle's diminished value.

Engage a lawyer to handle your claim, as they can negotiate for a higher settlement and advocate for your best interests.

By taking these steps, you can better protect your financial interests and health when dealing with car accidents and their aftermath. Remember, the right representation and knowledge can significantly impact the outcome of your claim.