If you are in an accident in Texas, and you are not at fault, you may be able to file a diminished value claim with the at-fault driver’s insurance company.
A diminished-value claim could enable you to receive compensation for the loss of value of your vehicle — even after repairs are made to it — because a car with an accident history will have less value than a vehicle that has not been in an accident.
Texas does allow for a diminished value claim — it’s a diminished value state.
What is a diminished value claim?
Diminished value, or loss of value or diminution in value (DV), is the difference in the fair market value of a vehicle without a crash history compared to the fair market value of a car with an accident history. You may want to make a diminished claim when your vehicle has been in an accident, and the value of your car decreases when the accident was not your fault.
In Texas, there are three types of diminished value claims you may be able to make. These are:
- Immediate Texas diminished value: This is the value of a vehicle that compares its value before an accident to its value after an accident without repairs being made.
- Inherent Texas diminished value: This is the difference between the value of the repaired car and the value it would have if it hadn’t been in an accident.
- Repair-related Texas diminished value: This loss of value of the car comes from the inability to restore your vehicle to the same condition as before the accident. This could come from repairs not being made correctly or the car not driving correctly after repairs.
When you are in an accident and the other party is at fault, you have up to two years to file a diminished value claim with the at-fault driver’s insurance company. According to the Texas Department of Insurance, you do not have an insurance contract with this insurance provider to make this type of claim. If you are in an accident with an uninsured driver, you can file a claim with your auto insurance provider using your uninsured motorist coverage.
It is your own insurance policy’s “limits of liability” section that likely says that your insurance provider’s liability is limited to the damaged vehicle’s actual cash value (ACV) or the amount needed to repair or replace the car, whichever is less. Your policy may include a liability level that is an agreed-upon amount, which can be for specialty or classic cars.
How do insurance companies determine when your car is totaled?
You also asked how car insurance companies in Texas determine when a car is totaled. This typically happens when the cost to repair your vehicle is close to the cost of its current value without damages. A car insurance provider may pay you to replace your car rather than to have repairs made to your damaged vehicle.
Typically, insurance companies will total a car when it costs anywhere between 50 percent and 100 percent of the car’s value to repair it. The cost of repairs is not the only thing taken into consideration. Insurers may also review the cost of storage, rental car costs and so on. If these costs make it uneconomical for the car insurance company to repair the car, they will find it a total loss.
Before paying you for your totaled car, the insurance company will also deduct for depreciation, which is the loss of value that comes from the typical wear and occurs over time. Another way to think about this is that if your car is seven years old and the insurance company declares it totaled after an accident, it will likely compensate you for being able to purchase a similar 7-year-old vehicle.
If you want to know more about Texas laws, insurance claims and the totaling of a vehicle, contact the consumer division of the TDI. For information on how your specific insurance provider calculates a car to be totaled, contact your insurance agent. If another driver damaged your vehicle and that insurer declares it a total loss, ask the insurance adjuster on your claim how they determine the car to be totaled out.
— Michelle Megna contributed to this story.