Diminished Value Claims, Explained

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  • Diminished value
  • Types
  • Filing a claim
  • Does insurance pay for it?
  • Calculating diminished value
  • Not-at-fault accidents
  • At-fault accidents
  • States and diminished value
  • | Uninsured motorists and diminished value
A diminished value claim compensates a driver for a drop in the resale value of their car after an accident.
Filing a diminished value claim can seem like a stressful experience. To help you through the process, car insurance comparison app Jerry has compiled everything you need to know about what a diminished value claim is and how to handle one.
And if you’re now on the search for the best car insurance for your newly repaired vehicle, Jerry can help you there, too.
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What is diminished value?

Simply put, a vehicle’s diminished value is the amount the car has depreciated in value due to being in an accident. Typically, buyers won’t pay the market rate for a car that’s been involved in an accident.
Repairs conducted with aftermarket parts can also contribute to a car’s diminished value.

What’s a diminished value claim? ||| Diminished value claim

A diminished value claim is the process by which you request money from your insurer to compensate for the reduced value of your vehicle after an accident. It considers the difference in a car’s value before an accident versus after repairs have been completed.
For newer cars, a diminished value claim can run into thousands of dollars.

Three types of diminished value

There are three types of diminished value to consider:
  • Immediate diminished value is the difference between a car’s resale or trade-in value from before an accident to after repairs have been completed.
  • Inherent diminished value assumes a car has been repaired to its original condition following an accident, but its value is lower because of the perception that the car is inherently flawed due to its accident history.
  • Repair-related diminished value refers to a car that has seen a value drop due to subpar repair work, such as a shoddy paint job or generic parts being used throughout the repair process.

Why does a car have diminished value after an accident?

Unfortunately, an accident permanently lowers the value of a car. Even if a vehicle is repaired to pristine condition, it still won’t sell for market value due to the fact that it was involved in an accident.
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How to file a diminished value claim

So, you’ve been in an accident and your car has since been repaired. Now you’d like to be compensated for the drop in value that your vehicle has seen since the accident.
First thing’s first: ask your insurance company if they offer diminished value coverage, as not all of them do this. And then before filing a claim, try to calculate your car’s diminished value on your own (keep reading to learn how).
If your insurer is willing to offer diminished value compensation, ask how much they will pay. If this matches or comes close to the diminished value figure you arrived at through your own research, feel free to proceed.
If you don’t agree with your insurer’s diminished value claim offer, you’ll have to provide further evidence to substantiate your claim. Each insurer will have its own procedure for this, so be sure to ask in order to properly abide by their rules.
At this point, you’ll have to decide if pursuing the claim is worth it.
Tip Always ask if your insurer handles diminished value claims, as not all of them do. But before filing a claim, calculate the diminished value yourself to make sure you’re getting a fair deal.

Will your insurer pay?

So, let’s say your insurer does offer diminished value coverage. Now the question becomes will they pay? The answer depends on the circumstances and the state you live in.
Your insurer will first look at who was at fault in the accident. This is the prime criteria in determining whether a diminished value claim will be accepted.
In some states, the wording of your insurance contract may exclude diminished value coverage if you are at fault. If you’re unsure, check with your state insurance commissioner’s office.
If your insurer won’t pay out your diminished value claim, contact your state’s insurance commissioner to help you decide how to proceed—if at all.
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How to calculate diminished value

Before filing a claim, you’ll want to do your own research and calculate diminished value for yourself.
Steal a page from the insurers’ playbook and follow the 17C diminished value formula. In truth, your insurer’s formula may differ from this one, but 17C will give you a good idea of the diminished value of your vehicle.
Figuring out diminished value is fairly simple and requires just a bit of research and some basic arithmetic.

1. Determine the value of your car

Check out sites such as Kelley’s Blue Book or Edmunds. Use their calculator to get a good idea of your car’s market (or pre-accident) value.
You’ll need to include the year, make, model, mileage, and the extent of any damage to your car.

2. Apply a 10% cap to that value

Simply add 10% to the estimated market value of your car. Insurance companies add a 10% cap to the value of a car. This number is the maximum amount your insurer will pay on a diminished value claim.

3. Add damage multiplier

When insurers are calculating your diminished value, they adjust the value by adding a damage multiplier. This is a number in a range from zero to one based on the structural damage to your car. The 10% cap number mentioned above is multiplied by this figure.
On the damage multiplier scale, zero represents no structural damage, while one represents serious structural damage to your car.
MultiplierExtent of damage
1.00Serious structural damage
0.75Major structural and panel damage
0.50Moderate structural and panel damage
0.25Minor structural and panel damage
0.00No structural damage

4. Add mileage multiplier

The next adjustment your insurer will make is adding a mileage multiplier to your diminished value calculation. The adjusted value from step three will then be multiplied by a mileage multiplier. This will give you the final diminished value of your car.
MultiplierExtent of damage
1.000-19,000 miles
0.8020,000-29,999 miles
0.6040,000-59,999 miles
0.4060,000-79,999 miles
0.2080,000-99,999 miles
0.00100,000+ miles
So, let’s say your car’s market value is $20,000. Your 10% cap on that will be $2,000.
If your car suffered “moderate” damage, you’ll multiply your cap by the multiplier—in this case 2,000 x 0.50 = 1,000
Now, let’s say your car has a lot of miles on it—say 85,000 miles. Your mileage multiplier is .20, so you’ll multiply 1,000 x .20 = $200. That’s your final diminished value.

If math isn’t for you…

If math isn’t your strong suit, don’t sweat it! Go to Kelley Blue Book or Edmunds in order to get your car’s pre-market value. Then, head over to a car dealership and ask what your car’s trade-in value would be.
Ask the dealership to provide a write-up so that you can get a good sense of how they incorporated your car’s accident history when determining its trade-in value.
The difference between these two figures—your car’s pre-accident value and its potential post-accident trade-in value—gives you an approximate diminished value. With that in mind, ask yourself if it’s worth it to file a claim.
You can also get a professional evaluation from a firm that does diminished value valuations. If you choose this route, be sure the company is qualified and verified by insurers.
Key Takeaway To calculate diminished value you’ll need to find the market value of your car, then follow the 17C diminished value formula.

Diminished value after a not-at-fault accident

If you were in a not-at-fault accident, your insurance company is more likely to approve your claim.
You also have the option of pursuing the at-fault driver and/or their insurance company—but it could be a long and difficult process. You’ll have to decide if it’s worth it.
If you’re unhappy with the diminished value offer made by your insurer, you can go to your state insurance commissioner’s office for a second opinion or further guidance about the process.

Diminished value after an at-fault accident

Unfortunately, it is much harder to get an insurer to honor your diminished value claim if you’re the at-fault party in an accident.
If you’re insistent on pursuing a claim in these circumstances, you may want to seek legal help to determine your chances of succeeding based on your state’s laws. If your insurer excludes diminished value claims for at-fault accidents, be forewarned that it may be an uphill battle.

What states pay diminished value claims?

In the wake of a 2001 lawsuit (Mabry vs. State Farm), the state of Georgia changed its rules requiring diminished value claims. Since that landmark case, more insurers will consider diminished value claims as long as the claim is backed up by evidence and the circumstances make sense.
Some states—though not all—have followed Georgia’s lead, believing insurance companies should pay diminished value claims. Ask your state insurance commissioner if your state is one of them.

Diminished value claims and uninsured motorists

Believe it or not, there are many drivers out there who are uninsured. If you’re in an accident with an uninsured motorist, you could suffer serious financial losses. You’ll need to ask your insurance company about whether you can file a diminished value claim.
You may also want to consider uninsured motorist coverage, which can help protect you and your vehicle in the event of an accident with someone who is uninsured or underinsured. To find the best rate for this coverage, compare multiple quotes using Jerry.
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