What You Don't Know About Your Car Insurance Could Kill You:

The modern unibody auto is a marvel of fuel efficiency and safety. But the very techniques designed for maximum protection for occupants and gas mileage have resulted in a precise structure that cannot be restored to the same degree of safety following a major collision using the standard frame-straightening and other techniques found in the collision repair industry. There are no standards regulating this well-kept secret of the insurance industry. That practice puts millions of Americans at risk in any subsequent crash.

Sunday, May 19, 2013

Diminished Value: The Hidden Insurance Company Rip-Off

The California auto insurance industry is costing consumers billions of dollars, encouraging auto sales fraud and putting potentially unsafe autos back on the road due to outmoded, dangerous laws regarding "diminished value."

Diminished value is the lower re-sale value of a car which has been repaired following an accident. Even if repaired so that a car appears new, the damage -- especially in major collisions where twisted frames and other serious damage occurs -- drastically lowers the retail market value. Often, the car is "toxic" and will find no buyers at all.

If the value of something in a free market economy is what someone is willing to pay for it, then a car that no one will buy has a value of zero. And that is what often happens to cars that have been in major accidents.

In the past, nationwide crash records were not kept and the sellers of the auto could -- either intentionally or unknowingly -- sell the car to an unsuspecting buyer who had no idea that a car had been in an accident. This lack of records encouraged silence on the part of the seller.

The advent of CarFax and other accident-tracking services is imperfect but has the potential to change that.

The fair market value of a vehicle has always been tied to its condition: age, wear, a mechanic's evaluation of the drive train, tires, visible dents, upholstery and more. CarFax and other services fall into the same category of information that allows a potential buyer to assess the appropriate fair price.

But thanks to a loophole in California state law, insurance companies will not allow CarFax or other repair records to be considered when calculating fair market value for damaged autos.

This is particularly serious in major accidents where frames and other major components have been twisted or destroyed. Insurance companies typically will not "total out" a vehicle unless the repair costs exceed 65% to 70% of the "fair market value" of the vehicle.

However, state law allows insurance companies to refuse consideration of CarFax and repair records in the valuation. Thus, a car which has never been in an accident and one which has been in a serious accident are assigned the same value.

As an example, this means that a vehicle that is worth $16,000 undamaged, but has been in major accident requiring $8,500 worth of repairs and been repaired, is still assigned a value of $16,000 even though a CarFax or other damage report lowers actual fair market value to $10,000 or less -- often no more than salvage value (parts). In this example,  the $6,000 difference between the undamaged value and the damaged but repaired value is called "diminished value."

Car owners owners are then left to eat the thousands of dollars they have lost because of the loophole since the ACTUAL fair market value of their vehicle is not the INSURED fair market value. That is deceptive on the part of the insurers.

Unethical or financially strapped owners are left to hope that no one checks with CarFax or that CarFax doesn't have a report which is very often the case. Thus, the "diminished value" loophole encourages fraudulent sales where the damage is not disclosed.

In addition, because late-model cars are made to crumple in order too protect passengers, the repair attempts to straighten crumpled zones results in micro fractures, metal fatigue and an overall inability to keep passengers safe in the event of a subsequent collision.

This is particularly important in "unibody" cars in which the frame is simply part of the overall structure. When the frame crumples in a major accident, the overall safety integrity is compromised when that vehicle is straightened. No one has any data on how many unsafe cars like this are on the road.

It's time this loophole is closed by the California Legislature.


  1. This comment has been removed by the author.

  2. This comment has been removed by the author.

  3. Great blog regarding to car insurance. After collision of car AAA Certified team check all parts then he inform the insurance company.

  4. This comment has been removed by the author.

  5. This comment has been removed by the author.

  6. In a few occasions, insurance agencies neglect to maintain their end of the deal and decline to pay out approach holders the sums they merit. At the point when this happens, it's imperative for people to look for the help and counsel of a protection extortion lawyer. London Polygraph

  7. Polygraph test done to distinguish reality, it is generally done in the criminal trials. Polygraph machine record all the anxiety which can be measured. Lie identifier are likewise called polygraph test since it comprise all together watch a few of the speculate's physiological reason.http://www.liedetectortestusa.com

  8. Good artcile, but it would be better if in future you can share more about this subject. Keep posting. Car Insurance Marble Falls

  9. Keep up the good work; I read few posts on this website, including I consider that your blog is fascinating and has sets of the fantastic piece of information. Thanks for your valuable efforts. vehicle insurance

  10. Hello I am so delighted I located your blog, I really located you by mistake, while I was watching on google for something else, Anyways I am here now and could just like to say thank for a tremendous post and a all round entertaining website. Please do keep up the great work. F&I admin solutions

  11. Not only does this author specialize in Car Insurance Benefits, car insurance tucson