Knowing what your car's worth both before and after an accident is very important. This helps the insurance companies decide how much to pay you for damages or whether to total it. Your vehicle will hold diminished value after the accident since it's no longer worth as much.

Determining Value

When you're involved in an automobile accident one of the things you will discover is that what you think your car's worth and what the insurance company tells you it's worth are often two entirely different things.

When your car is totaled the insurance company doesn't have to pay what it would cost you to pay off or replace the car. They'll pay the actual cash value of the car. The actual cash value can be calculated a number of ways and the process used can differ from one insurance company to the next. Some of the things taken into consideration are:

  • Retail value for your type of car in its pre-accident condition. Edmunds and Kelly Blue Book are commonly used to find the retail value of a car.
  • Price paid for the vehicle plus documented improvements or repairs made to it.
  • Damage to the car that happened before the accident.

When your insurance company comes up with a figure, don't be afraid to ask them to explain how they arrived at it.

Diminished Value

After an accident, the insurance company is obligated to return the car to its pre-accident state. This is nearly impossible. The very act of being in an accident automatically reduces the value of the car and makes it more difficult to sell. The quality of the repair, however, has a great impact on the vehicle's future value.

Some insurance companies require you to go to specific car repair shops or to the dealer or they won't pay. Also, be sure to ask if insurance covers new parts or if the repair shop must use secondhand parts to save money. This could hurt you later on if you try to sell the car or try to get additional insurance on it.

People aren't as likely to purchase cars that have been in accidents due to the potential for future problems. There are now companies such as Carfax where people can obtain information about used cars using the VIN or Vehicle Identification Number to trace previous insurance claims. Many states also require owners to disclose the accident history to potential buyers.

Even though this psychological impact may leave a lasting impression on future buyers of the car, insurance companies only pay for its physical conditions. However, it may be worthwhile when placing a claim to also ask for compensation to covering possible diminished value when trying to sell the car.

Questions For Your Attorney

  • My insurance company changed the way they determine the value of my vehicle. Can they do that? Can I hold them to the way they previously determined the value of my car?
  • How can I recover from my insurance company the possible diminished value of my car if I decide to sell my car in the future?

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