The diminished value of a vehicle is the difference between what it’s worth on the market before an accident and the market value after the car is damaged in an accident. There are times when the insurance provider will want to settle a claim based on the car diminished value rather than the market value. This can work to your advantage in certain instances. Here are a few examples.
Filing a Diminished Value Claim
If your insurance company does seek to settle a claim based on what the car is worth after an accident, you can file what’s known as a diminished value claim. If successful, you may recoup a portion of the difference in the pre-accident market value and what the car is worth now.
How much can you recoup? There’s no solid answer that applies in all cases, but it’s not unusual to be able to get back somewhere between 10% and 25% of the pre-accident market value. That can amount to a substantial sum depending on the make and model of the vehicle.
Saving Money on Future Insurance Costs
While not true everywhere, there is a chance that you may be able to secure lower auto insurance rates in the future. That’s because some insurers may assess the vehicle’s worth on the diminished value. The result may be that you end up with lower premiums.
This may or may not happen with the present insurance provider. That doesn’t mean a competing company may not offer this type of benefit. Before taking them up on the offer, make sure you understand the scope of coverage and the deductibles that will apply. If it would mean settling for less coverage than you have now, it’s not worth going to the competition.
Lower Costs for Tax and Tags
In some jurisdictions, the annual amount you pay for the car tax and tag may be lower. This is true if the local tax assessor bases the amount due on the car diminished value rather than the pre-accident value. Depending on the age and model of vehicle involved, the difference could be substantial.
If you want to find out if this is true, contact the probate or other office that handles the calculation of taxes due. Someone there can tell you if this is part of their current procedure and also help you ensure that the information is taken into account when your taxes for the upcoming year are calculated.
The Loss in Diminished Value May Also be Tax Deductible
Did you know that diminished value may qualify you for a one time deduction on your annual federal taxes? There are provisions in the current tax laws that make it possible to claim that value and receive it as a deduction off your tax return.
In order to claim the deduction, you must have filed your original claim within a certain amount of time. It must be during the tax year under consideration. Specify the amount of the loss that was not covered by the insurance company. You will record all the data on IRS Form 4684 in order to seek this deduction. Keep in mind that you can also claim the expense associated with securing a diminished value assessment report as supporting evidence.
Diminished value doesn’t always mean that you have to lose out completely. Find out if you can get the situation to provide at least some benefits to you. While they won’t completely offset your loss, they will minimize it and allow you more resources to move forward.