Auto Insurance Rip-Off

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If you’re in an auto accident in which another driver is at fault, you’re probably not going to get all the money you should. That driver’s insurance company likely is legally required to compensate you for diminished value—the loss in resale value that your vehicle suffered due the crash. But insurers inevitably try to pay less than is fair and often even deny that diminished-value compensation is required at all.

Even when accident damage is perfectly repaired, having an accident in a vehicle’s history significantly reduces its resale value. Potential buyers worry that the vehicle might have hidden problems.

If the at-fault driver’s insurer claims that diminished value is not covered, it is lying, unless the accident occurred in Michigan. (In Georgia, you’re even entitled to diminished-value compensation from your own insurance company if you were at fault in the accident.)

Never assume that an insurer’s initial diminished-value offer is fair. Insurers generally use “Formula 17c” to determine diminished value, which never pays more than 10% of the vehicle’s blue book value and usually pays less. In reality, even a fender bender will reduce resale value by at least 10%. A more serious accident could do so by up to 25% even if repairs are made.

If you’ve been in an accident and an insurer is refusing to pay you fair diminished value, hire an appraiser (typically $250 to $350) to produce a report establishing your diminished-value loss. A list of qualified diminished-value appraisers can be found on my Web site (, then click “Local DV Professionals”). If there’s no qualified appraiser in your area, an online appraisal service can produce a report for around $200. This won’t be as persuasive as a local appraiser’s report because the online service won’t examine the damage in person. But if you use one of the four online services that are respected by insurers—Collision Claim Associates (866-438-6938, …Collision Consulting (866-382-5246,…Wreck Check (281-741-1670,…or my organization, the Insurance Consumer Advocate Network (—the report still should be an effective negotiating tool.

Source: J.D. Howard, executive director of Insurance Consumer Advocate Network, an insurance consumer advocacy organization, Springfield, Missouri. He has worked in the insurance industry since 1965, mainly as an insurance adjuster.


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