- November 30, 2022
- Posted by: admin
- Categories: Auto Insurance, blog
A Diminished Value Claim (DVC) is an insurance claim to recover money for the expected loss of resale value after a vehicle has been through an accident — even if it has been restored to a near-perfect condition. Since the accident is in the history report of the car, potential buyers will perceive its value as lower.
If you’re looking to get car insurance services in Indian Orchard, don’t underestimate the importance of a DVC.
Read as we discuss this concept in detail:
DVCs pay you for the drop in your vehicle’s value
If another person caused the car crash, you’ll be eligible for compensation. Most of your reimbursement will cover your lost wages, pain, suffering, and medical bills.
However, you also deserve compensation for the repair expenses of your vehicle. However, one aspect is often overlooked: the decrease in the vehicle’s value after an accident.
The aim of a DVC is to recoup payment for the lost value from the insurance company (of the driver at fault).
For instance, Tiffany gets in a car crash. Prior to the accident, the worth of her car was $60,000. After the accident, its worth has come down to $52,000. She files a DVC with the insurer (of the driver at fault) for the loss of $8,000.
You might not recover compensation if you were at fault
Most car insurance policies wouldn’t include coverage for the diminished value of the policyholder’s car if the policyholder caused the damage. So, before filing one of these claims against your own car insurance company, review your policy first.For instance: Jeffery bumps into a building’s wall while parking his car. The impact cracks the paint on his car’s fender. The repairs mismatch his new fender’s color with the rest of the car. However, because Jeffery caused the accident, he may not be able to recover the vehicle’s diminished value.But laws of certain states require insurance providers to pay DVCs, irrespective of who was at fault.There are three kinds of DVCs
Cars may drop in value after a crash in three ways:
- The repairs themselves diminish the vehicle’s value.
- The immediate diminished value post-accident before any repairs are carried out,
- The stigma of the car’s new accident history.
Depending on which phase your case is in, at least one of these possibilities may be presented to you.
Value diminished by repairs
It’s possible to claim compensation for the car’s value that was reduced by repairs. Most repair shops don’t make high-quality repairs. They may:
- Paint the car part a marginally different color than the rest of the car
- Use corner-cutting techniques, or
- Use used/aftermarket auto parts
While these repairs may be sufficient to make the vehicle safe and reliable, they can considerably decrease its value. Since the accident led you to suffer from these losses, you deserve compensation.
Immediate diminished value
Filing for your car’s immediate diminished value is anunusualkind of DVC. This is the drop in value triggered by the accident prior to repairs being carried out.
Compared to other claims, these types of claims require additional compensation. However, they’re uncommon because your car insurance company usually pays the repair costs. After those repairs are performed, filing these kinds of DVCs isn’t possible.
Value diminished by stigma
Recovering value lost due to the stigma of the accident is arguably the most common type of DVC. When trading in or selling the vehicle, your potential buyer is likely to research the vehicle’s accident history. They’ll find information about:
- How severe was the accident?
- What structural damage was done to the car?
- Where did the damage occur?
- What repairs were made?
When prospective buyers find that the vehicle was involved in a crash, there’s a chance they’ll reduce their offer for it. They do this because there’s a stigma against cars that were part of an accident — they may be worried about latent issues from the accident or be concerned about repairs not being done well.
Ultimately, the reduction in value is due to the car crash. If you weren’t at fault for the accident, you’re entitled to receive compensation. These types of DVCs are also referred to as:
- Residual diminished value,
- Stigma damage,
- Inherent diminished value
Note that this isn’t depreciation, which is your car’s diminished value as a result of routine wear and tear.
Insurance companies compute the diminished value
Once you file a DVC with a company, the company will find out the value lost in the accident. Many insurance companies calculate the diminished value using the 17c formula.
This formula starts off with your car’s appraisal value. This is your car’s value before the accident. Often, it comes from the Kelley Blue Book or the NADA (National Automobile Dealers Association).
This value is then multiplied by 0.1. Often referred to as the base loss of value, this number represents the highest diminished value that a car may experience in an accident.
The damage multiplier then comes into the picture, altering the base loss of value. The range of the damage multiplier is from 0 to 1. The more severe the crash, the higher the numbers:
- 1.00 — the structure of the vehicle has sustained severe damage
- 0.75 — major structural and/or panel damage
- 0.50 — moderate structural and/or panel damage
- 0.25 — minor structural and/or panel damage
- 0.00 — no structural and/or panel damage
This number is then adjusted by a mileage multiplier. Compared to newer vehicles, older ones that have been driven more don’t lose a lot of value. The results are multiplied by one of the numbers below:
- 1.00 — less than 20,000 miles
- 0.80 — 20,000 to 39,999 miles
- 0.60 — 40,000 to 59,999 miles
- 0.40 — 60,000 to 79,999 miles
- 0.20 — 80,000 to 99,999 miles
- 0.00 — more than 100,000 miles
For instance, Steven’s 2017 Honda Civic is damaged in an accident. He files a DVC against the insurance company of the at-fault driver. To calculate the diminished value, the company employs the 17c formula. Since the car is appraised at $10,500 by NADA, it has a base loss value of $1,050 (by multiplying $10,500 by 0.1). Due to minor damage, this value is multiplied by 0.25, which gives us $262.5 (by multiplying $1,050 by 0.25). Since Steven’s vehicle had 67,000 miles on it when the crash happened, the milage multiplier is 0.40. This puts his DVC at $105 (by multiplying $262.5 by 0.40).
However, this formula isn’t perfect. Sometimes, it undervalues the diminished value of a vehicle. If you’re not satisfied with the offered payout, don’t hesitate to consult a lawyer.
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