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Car Insurance Diminished Value Payments

Car insurance diminished value payments are a feature of auto insurance coverage and car insurance customer service that many policy holders are completely unaware of. In the wake of car accidents and resulting repairs they can help auto owners recover the loss of monetary value of their vehicles. For drivers who have full coverage car insurance policies with cheap auto insurance rates, this is one area that it is very important to be familiar with so that you make sure to take full advantage of all of the protection offered by your policy.

Car Accidents and Diminished Value

Diminished value is a concept directly related to what happens to vehicles after auto accidents. To understand what this concept really means, it is useful to look at a brief hypothetical example. If an auto owner gets into an accident he'll have to make a claim on his collision insurance. As the claim is settled the insurance company pays out the money to make repairs to the car less deductible. But when the owner tries to sell the car for the NADA (National Automobile Dealers Association) value, he can't get anyone to bite, because they all are aware that it has been in a wreck and the perception is that the car is not worth nearly that much money after the collision.

Even though all of the problems specifically caused by the car accident were repaired, somehow the car isn't considered the same one it was before the accident. And this runs contrary to the auto insurance company's basic responsibility to restore the vehicle to its previous condition in an accident situation. This is what we pay our insurance premiums and deductibles for as customers. But since the accident is on the title of the car and there is nothing you can do but acknowledge it, you will never get the money that you would have gotten had you sold it the day before that car accident. This in essence is what the concept of diminished value is all about.

Through the years, auto insurance policy holders have made the contention that their insurance companies have a responsibility under the provisions of their contractual agreement to return their cars to their previous condition as it existed prior to a car accident, and that one component of this condition or one way to measure it is in the monetary value of the car or what it can fetch on the open market. Those who make the claim that they have suffered diminished value will further contend that their vehicles have not been restored according to these specifications, and that they have compensation coming to them as a result. And certain consumer advocates agree, long siding with drivers by saying that they are entitled to an additional payment covering diminished value if they can prove that their vehicles have not been returned to the condition they were in before the accident.

In most cases a specific monetary value will be attached to the loss of value, and many policy holders will say that no matter how well repairs are done and what kind of parts are used (OEM or aftermarket), the cars will never sell for the same price that they could fetch if they had never been in an accident. The trouble is that the language in most insurance contracts does not specifically mention diminished value, particularly in relation to losses suffered as a result of accidents. Insurers invariably assert that they are not responsible for these losses and that their coverage does not include such protection. Conflicts over these claims have been to court many times over the years.

ISO and Insurance Diminished Value

But the Insurance Services Office (ISO), a government office providing insurance data and other services, put together model policy language that companies in many states across the country can use in their policies, essentially removing them from responsibility in these cases. Companies that adopt this language for use in their policies have more support for their claims that they have no legal responsibility to take care of diminished value losses following car accidents. In some states the insurance department of the state government has some say in approving the language put together before insurers selling policies in the state use it, since auto insurance regulation on most fronts is an industry regulated at the state level.

Car insurance diminished value payments have been somewhat commonplace through the years, but the industry has gained more ground in putting the stop to these payments. Interested parties who wish to know whether their policies contain specific exclusions to this type of payment should look for an auto exclusion endorsement usually found near the back of the policy. Diminished value is hard to prove and these days even harder to claim in an auto insurance policy in most states.


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