How Do Insurance Companies Calculate A Diminished Value Claim?

Jaguar-XJLCrash Calculator makes it easy for you to find out what the value of your damaged car with our easy to use diminished value calculator. But what about the reimbursement amount you get from the at fault driver’s insurance company? How do insurance companies calculate a diminished value claim? Well, I assure you it’s different than we do it and we don’t low-ball you.

Most insurance companies use what’s known as 17c as their diminished value calculator developed by Infinity Insurance. How did 17c become the standard for insurance companies for calculating diminished value? State Farm submitted it as a calculation method in a case (Mabry v. State Farm) that would calculate diminished value and the court approved its use. As a result, most insurance companies have adopted 17c as the standard formula because of the low value it produces. If 17c is not used, they’re using a close variant of it.

How 17c Works

Step 1: Calculate the value of the car

The 17c formula starts with the NADA value of a car taking upgrades into consideration. This number is then adjusted down for any prior damage and then based on mileage, it’s adjusted up or down depending on the mileage.

Step 2: Arbitrary cap for damages applied

The retail value of the car from step one is then multiplied by 0.10 to produce a base loss of value.

Step 3: Damage multiplier applied

Now that they have established an upper limit, the insurance company begins reducing your diminished value claim. Based on how severe your car damage is, the multiplier reduces your insurance claim reimbursement.

Based on the level of damage the base loss of value is multiplied by this number:

  • 1: severe structural damage
  • 75: major damage to structure and panels
  • 50: moderate damage to structure and panels
  • 25: minor damage to structure and panels
  • 00: no structural damage or replaced panels

Notice anything missing in the above list? Mechanical damages are omitted because the insurance company’s position is these types of car damages can be repaired with parts. This means, any damages to the structure can be hammered out, so to speak, so are recoverable. However, any replacement parts that can be or are replaced are not recoverable. This doesn’t cover the loss in value – diminished value – when you go to sell your car; which is another reason this formula isn’t fair to you. Moreover, when you do sell your car as a trade-in, the car dealership will most definitely take into consideration it’s been in a car accident – Carfax – and reduce their offer on your trade-in value.

Step 4: Mileage Gets Double Dipped

There has already been one mileage adjustment in step 1, and now it’s time for another one.

  • 0: 0-19,999 miles
  • 80: 20,000-39,999 miles
  • 60: 40,000-59,999 miles
  • 40: 60,000-79,999 miles
  • 20: 80,000-99.999 miles
  • 00: 100,000+

Notice 100,000+ miles automatically drops to zero. I guess double dipping isn’t enough for insurance companies and they have conveniently excluded an enormous amount of vehicles with over 100,000 miles on the odometer.

How does this look in real numbers?

Step 1:  A car several years old has a retail value of $15,000.

Step 2:  10% cap is applied to establish a base loss value. 0.10 x $15,000 = $1,500.

Step 3:  Assuming the car damage is moderate let’s apply 0.50 as a damage multiplier. $1,500 x 0.50 = $750.

Step 4:  Four year old car with 12,000 miles driven per year, a total of 48,000 miles is on the odometer which makes it a 0.60 mileage multiplier, $750 x 0.06 = $450.

The insurance company would offer you a $450 reimbursement on your diminished value claim. That’s under 4% of the car’s value and very unfair to you.

The thing to remember here, is when it comes to knowing the diminished value of your vehicle due to a car crash, you don’t have to worry how insurance companies calculate a diminished value claim. We make it easy for you with our diminished value calculator and you’ll get a number you’ll like. We don’t use a sneaky formula to low-ball you and we help you get the reimbursement amount the insurance company doesn’t want you to know you’re entitled to. Get started now and let’s find out your true reimbursement amount.