Diminished Value Claims in Car Insurance

To define what a diminished value claim is, first let’s define diminished value.

What Is Diminished Value?

The diminished value of a vehicle is the car’s value after it has been damaged in an accident. This amount is often lower than the car’s worth pre-crash, even if it’s been repaired well. To find a car’s diminished value, subtract the worth of the cost post-repair from the worth of the car pre-crash.

While the diminished value is typically lower than the pre-crash value, if you have an older car, it may be worth more post-crash if the repairs were done with new parts. An appraiser can help make this determination.

To put it all together, a diminished value claim is an insurance claim asserting a car has diminished value due to an accident.

Diminished value isn’t one-size-fits-all. There are different types, depending on the situation and the time of the appraisal.

Inherent Diminished Value

Inherent diminished value is a loss in value due to a vehicle’s involvement in an accident. It is the most common and accepted type of diminished value.

Repair-Related Diminished Value

Repair-related diminished value means that the vehicle wasn’t properly repaired after an accident, with structural and/or cosmetic damage. The repairs also may be incomplete at the time of the claim.

Immediate Diminished Value

Immediate diminished value is the state of the car right after the accident but before it’s been repaired.

To file a diminished value claim, first you’ll need to get your vehicle appraised to find its value post-crash. You can hire a third-party appraiser to evaluate the car and potentially get the biggest reimbursement possible.

Order an Appraisal

There are two types of appraisals.

• Auto appraisals: An auto appraisal takes into account a vehicle’s entire history. You present the appraiser’s expert opinion on the vehicle’s current worth to either an insurance company or a car loan provider.
• Total loss appraisals: A total loss appraisal determines if the vehicle’s cost of post-crash repairs exceeds the vehicle’s current worth. If the repairs cost more than a certain amount of the vehicle’s value, it will be considered a “total loss” and eligible to be replaced.¹

Total-loss thresholds vary by state. Check your state’s total-loss threshold below.²

File a Claim

After the appraisal, you file either a first-party claim (if the other party in the accident lacks insurance) or a third-party claim with the other party’s insurance company.

Get Compensated

If your diminished value claim is accepted, you’ll be compensated not only for the cost of your car’s repairs but also for its diminution in value.

While auto insurance companies don’t reveal their exact formulas for calculating diminished value claims, we know that they consider these factors about the vehicle:

• Make
• Mileage
• Model
• Model year
• Nature of the damage (structural, mechanical, or cosmetic)
• Pre-loss condition
• Prior accident history
• Impact severity

There are numerous companies that offer resources to help you estimate your car’s diminished value, including Kelley Blue Book, Edmunds, Autoloss, NADAguides (J.D. Power), and Carfax.

Filing an insurance claim correctly could mean the difference between being made whole again or losing money due to your accident.

Who Can File

Only you as the policyholder can file a diminished value claim, either with your own insurance provider or with third-party car insurance.³ However, it makes sense to file only if you were not at fault in the accident.

When to File (And How to Get the Most Money)

File your claim after your vehicle has been appraised and repaired. Assuming the other party has insurance, you’ll file a third-party claim and request compensation using the documentation your appraiser provided. From there, they can negotiate to help you get the most compensation. Look for an appraiser, consumer advocate, diminished value company, or your own adjuster.⁴

Do Companies Have to Pay Diminished Value Claims?

If you caused a car accident, your insurance company does not have to pay for your car’s diminished value, only its repairs under collision coverage (minus your collision deductible).

However, if the accident was not your fault, the other party’s insurer must make you whole again through either the other driver’s liability insurance or, if they lack insurance, your policy’s uninsured motorist coverage. That said, you have to prove diminished value, probably by using a third-party appraisal company.⁵

The point of car insurance is to protect you from financial losses following a car accident, so making sure you’re financially whole after a car accident is essential. However, if you don’t hire an appraisal company, your insurance may cover only your car’s repairs and not its diminished value. Sometimes, it’s worth spending a little money with an appraiser upfront to save you more money in the long run.

To learn more about diminished value claims, read our frequently asked questions below. Or, to learn about a related claim, read our article on subrogation claims. If the other party’s insurance provider refuses to pay your diminished value claim, your insurance provider may have to file a subrogation claim if it paid for the diminished value itself.