What is inherent diminished value and do car insurance policies cover it? By federal law, all car owners are responsible for having insurance on their vehicles. This is to protect the drivers, the state and the government from expensive lawsuits.
Understanding Inherent Diminished Value
In its purest form, Car A rear-ends Car B causing $10,000 of damage. Car A's insurance coverage is responsible for covering the costs of damage. Prior to the accident Car B was valued at $40,000. Even after the repairs have been fixed and Car B is back out on the road, is it still worth $40,000?
Many would say no. After all, when the owner of Car B tries to sell the car, the accident appears on the ownership report. There is a good chance prospective buyers will insist on paying less than the $40,000 simply because of the car's history. This gap of value caused by the accident is known as inherent diminished value.
What many car owners don't know is that Car A's insurance company is financially responsible for the Car B's inherent diminished value. In addition to the cost of repairs, Car A's insurance company should have included the difference between Car B's market value prior to the accident and the now sub-standard value vehicle. Courtesy Car Ltd. can help you determine if inherent diminished value applies, and if it is applicable, we will assign an appropriate price tag.
Inherent Diminished Value