How Diminished Value Affects Your Car Insurance Rates

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What is diminished value and how exactly can it affect your insurance premiums? Many car owners ask this question, and while its effects on a car’s value might shock you, by taking certain steps you can get back any value you lose after a car accident as compensation from your insurance company.
Find out more about diminished value and how it affects your car insurance premiums.

What is diminished value?

Diminished value represents the reduced value of a car following an accident. A car’s value goes down following an accident, even if you get it repaired using authorized original parts at the dealership.
Basically, an accident shows up on the car’s history report and forever tarnishes its value, no matter how well repaired it is, in the eyes of any future potential buyers if you decide to sell the vehicle. The following definitions represent the most common instances of diminished value:
  • Immediate diminished value: Immediate diminished value represents the difference in the resale or trade-in value of your car from before an accident happened and its value after any repairs following an accident.
  • Inherent diminished value: Inherent diminished value represents the inherent loss of value for a car following a crash. This inherent loss of value results in a reduction of the trade-in or resale value of the car.
  • Repair-related diminished value: Repair-related diminished value results from bad quality repairs, such as the color of the paint not quite matching. Using aftermarket parts to make the repair can also diminish the value of a car. A repair-related diminished value happens in addition to the value already lost following an accident.

How diminished value affects your car insurance premium

Diminished value does not change how much you pay in premiums for liability insurance. Acquiring insurance after buying a car that was in an accident represents where diminished value might come into play. Depending on the extent of the damage, you could encounter difficulties getting the car insured, and if the vehicle was declared a total loss, forget about purchasing comprehensive or collision coverage for that vehicle.

What is a diminished value claim?

For vehicles involved in an accident, you can file a diminished value claim. You must make a diminished value claim with your insurance company, separate from the accident claim, to recoup the value your vehicle loss due to the accident. Laws regarding diminished value claims vary by state and insurer, but for the most part you have a certain amount of time to file a claim as detailed in the chart below from Diminished Value Car Appraiser:
Diminished Value Statute of Limitations by State
State Statue of Limitations by Year
Alabama 2
Alaska 6
Arizona 2
Arkansas 3
California 3
Colorado 3
Connecticut 2
Delaware 2
District of Columbia 3
Florida 4
Georgia 4
Hawaii 2
Idaho 3
Illinois 5
Indiana 2
Iowa 5
Kansas 2
Kentucky 2
Louisiana 1
Maine 6
Maryland 3
Massachusetts 3
Michigan 3
Minnesota 6
Mississippi 3
Missouri 5
Montana 2
Nebraska 4
Nevada 3
New Hampshire 3
New Jersey 6
New Mexico 4
New York 3
North Carolina 3
North Dakota 6
Ohio 2
Oklahoma 2
Oregon 6
Pennsylvania 2
Rhode Island 10
South Carolina 3
South Dakota 6
Tennessee 3
Texas 2
Utah 3
Vermont 3
Virginia 5
Washington 3
West Virginia 2
Wisconsin 6
Wyoming 4
Source: [Diminished Value Car Appraiser](
When filing a diminished value claim, some car insurance companies might give you problems depending on the age of your vehicle or if it was involved in an earlier wreck. If possible, take photos of your car when you first buy it. Then when you have an accident, take photos of the damage as a comparison when you make your claim.
Finally, determine the market value of your car at the time of the accident. You can do so using such sites as Kelley Blue Book, National Automobile Dealers Association, and Edmunds.
Filing a diminished value claim can help you get back some of your vehicle’s value that was lost after an accident.

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