Diminished value is the amount of value your vehicle loses after an accident, even if the insurance pays to repair the vehicle. If you have been in an accident and had your car repaired and then later sold it, you probably discovered that it was no longer worth the expected book value. That is diminished value in action, and something that car owners need to be careful of.
Depending on your insurance policy, you may be entitled to compensation for the loss of value of your car. Because the vehicle is insured for a specific value, some insurance companies will settle insurance claims by offering you a check for the difference between the carâ€™s pre-accident value and its diminished value after the repairs have been made. To find out whether your insurance company offers a payout for the diminished value, read your policy carefully or contact your insurance agent.
While you can purchase diminished value coverage from some companies, a majority of insurance providers state that the original intent of the insurance was to repair damages to the vehicle, not to maintain its market value after an accident occurs. From the point of view of insurance companies, settling a claim for diminished value would simply be too expensive to offer. For instance, the resale value of aÂ car that has been in a flood situation is going to be much lower than a car that was not flooded, reducing the trade in or resale value to only a fraction of the original cost, even if the car is otherwise in excellent condition.
If you want to purchase a policy that includes diminished loss coverage, the best place to start looking might be a website that offers free auto insurance quotes and comparisons. Not only can you tailor the policy to be exactly what you need, but you can compare the cost of that policy between several leading insurance companies.