Does a Total Loss have Diminished Value?
Short answer: No!
I get this question all the time, so I am writing this article in an attempt to properly explain why a total loss settlement does not include diminished value.
First, let us define Diminished Value:
Diminished Value is the loss in re-sale value of a vehicle after it has been in a wreck and then repaired.
Second, let us define Total Loss:
A Total Loss occurs when the insurance company decides that they are not going to repair your vehicle.
There are a few things to realize when you are dealing with an auto claim.
- The insurance company is trying to get out for as cheap as possible. Rant and rave right at the beginning of your claim about diminished value and rental and such. You’ll have a much higher probability of your vehicle being determined a total loss.
- An insurance adjuster CAN change their mind. They might first tell you that your vehicle is repairable. After they look at it a little better, they could decide it’s a total loss and there isn’t much you can do about it.
- Don’t believe anybody that says there’s a law about total losses. I was a licensed all lines adjuster for many years and handled claims for nearly 15 years. I am here to tell you, there is no law about total losses. There’s a law about when a vehicle title has to be flagged as a salvage vehicle. Maybe people are calling that law the total loss law. Be warned: the insurance company can declare your vehicle a total loss at any time prior to repairs being completed. If they’re brave, they can declare it even after the repairs are done but that gets sticky. This tactic will normally result in a lawsuit.
The insurance company doesn’t have to pay for additional rental after a vehicle is totaled in most states. There is one big expense avoided.
Insurance adjusters find the total loss option attractive if they are dealing with a “difficult” customer.
A note – this is not true in Texas anymore! Refer to our article Rental Car on Total Losses – Can You Claim It? which discusses the recent Texas Supreme Court Case, J&D Towing LLC v. American Alternative Insurance Corporation 2016 WL 91201 (Tex. 2016). This righted a major wrong that has been going on since before there were even cars. (Don’t worry, its a short one!)
The insurance company is done with the claim if they pay you for the fair market value of your vehicle BEFORE it got wrecked. It takes a bit of knowledge to negotiate effectively if you don’t agree with the value they quote you. You can argue and they may move up on the offer a little to get you out of their hair, but it will not be a substantial difference.
What do you really need to know when trying to settle your total loss?
You might have to hire an expert to really argue. In my experience, people hire experts in the wrong situations. You should request a free total loss claim consultation from our website to find out if yours qualifies. The form is below!
You have to understand that the value an insurance company will pay you is based on how much you could get for your vehicle on the “private” market.
Why is that you ask?
- You’re not a dealer therefore you cannot get a retail price for your vehicle.
- You don’t offer financing and can’t give a “certified” used car stamp
- There’s no 25 point inspection
- You do not have a huge marketing expense.
The value you paid for your car, or the value of other cars sitting around on a dealer’s lot is not what the private value of your car is. Keep that in mind.
Here are your typical options on a Total Loss:
- If you disagree by $1500 or less on a third-party claim, the insurance company is probably close on the value of your car and you probably shouldn’t spend money trying to prove it. Do a little negotiating on your own instead and try to get them to come up on their number. We have an ebook that discusses this exact thing and goes over the best arguments to present.
- When the third-party adjuster won’t negotiate and you have coverage through your own policy, see what kind of offer your insurance company will make. You have the power of the appraisal clause in your contract if the same thing happens from your insurer.
- On a first-party claim, look into the appraisal clause and call and talk to us to see what your options are under that clause!
More articles about Appraisal Clause:
- Appraisal Clause? Unethical/Incompetent Appraiser? Bad Faith? What the Heck?
- What is the difference between an adjuster, an estimator and an appraiser?
- WHAT CAN YOU EXPECT FROM THE NEW CARFAX TOTAL LOSS EVALUATION THEY JUST ANNOUNCED?
- Tesla Model S Appraisal Clause Dispute
- The Convoluted Appraisal Clause
So now we elaborate on the question: Does A Total Loss Have Diminished Value?
The only time there is diminished value after an accident is if your vehicle is being repaired.
Research our website for diminished value topics if you’re dealing with someone else’s insurance company on the repair of your vehicle (and you don’t have a clunker).
You could still qualify to get diminished value if you are dealing with your own insurance company but I would suggest you get an expert to give you some advice on whether or not you can successfully recover against your own carrier. A lot of policies simply exclude that type of coverage. It is a matter of contract law vs. tort law, and I don’t know how to put it in any simpler terms.
In conclusion, a Total Loss never has diminished value.
It is a loss, therefore there is no more property available to have a value to diminish. Get it?
Your vehicle will most likely suffer some diminished value if it is repairable and fairly new or a luxury/exotic. Whether you can collect it is based on contract law and tort law and varies according to the state where the accident occurred. I hope this helps clear it up for you!
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