When you purchase car insurance for your vehicle, the insurance company will base your policy cost on many things, including the value of your car. Unfortunately, the value of your car decreases the longer you own it, which means you do not know how much money you will get if you wreck the car or total it. In addition, once you wreck your car, you will inherit something called diminished value. Here are a few things you should know about diminished value on a vehicle.
What Is Diminished Value?
Diminished value is a term that refers to the loss in value of a car after it has been involved in an accident. Even if you wreck your car and fix everything that was damaged, your car will not be worth as much as it would have been if you had not wrecked it. Once a car is damaged and repaired, it automatically loses some of its value.
The reason diminished value exists is because of the issues a car can have after an accident. Even if you hire the best body shop to fix your vehicle, a wrecked car still has the potential to experience problems. Because of this, people will not buy your car for the same amount as they would for the exact car that was not involved in an accident. Car buyers are leery of wrecked vehicles, even if there is no visible damage or evidence that the car was ever involved in an accident.
What Can You Do to Protect against This?
If you are in an accident, you can talk to your insurance company about reimbursing you for the diminished value from the accident. If you caused the wreck and had full-coverage insurance, your insurance company may have you file a diminished value claim on the car. If the other driver caused the accident, this is a claim you may need to file with the other party's auto insurance company.
When either insurance company settles your claim, they will have to determine the diminished value of your car. Some insurance companies use formulas to determine this amount, while others may use percentages. There is no standard procedure used by all insurance companies to determine this amount; however, you can negotiate this amount with your insurance company.
If you choose to negotiate over this amount, you may need to take your vehicle to an auto appraiser. An auto appraiser could tell you the value of your car after the repairs were made, and you could compare this to the current market value of a car that is the same year, make, and model as yours. The difference in these two amounts should represent the diminished value of your car.
Do All Insurance Companies Pay for Diminished Value?
When you are in an accident that you caused, your insurance company might not be obligated to repay you for the diminished value of your vehicle. Some insurance companies only offer this type of protection if you have a rider in place that is designed to cover diminished values.
If your policy does not currently cover this, you may want to talk to your auto insurance company about adding coverage for this purpose. In addition, after a wreck it might also be a good idea to talk to your insurance company about gap insurance.
Gap insurance is an additional type of coverage you can purchase that can come in handy if you total your car. With gap insurance, your insurance company will pay the deficit that can arise from owing more on your car than the amount it is worth when it is totaled. This type of coverage can be especially important if you have already wrecked your car once, simply because the diminished value might have caused your car value to drop well below the amount you still owe on your car.
To learn more about coverage types for your vehicle, contact an auto insurance company like Family Insurance Centers today.
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