Diminished Value Claims: How You Might Be Able to Recoup Some Losses After a Car Accident

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Insurance might cover the cost of repairs after an accident — but your losses might go beyond dents and scrapes. 

If your car is now inherently less valuable, “somebody may not want to buy that car for the same amount of money as another car that hasn’t been involved in a serious accident,” says Jeff Zander, CEO of Zander Insurance. “You have the right to try and get compensated for that loss.”

By filing a diminished value claim, you might be able to recoup some of the car’s depreciated value. If you’re successful, the insurance company pays you the difference between the car’s value before and after the accident. 

What Is a Diminished Value Claim?

A diminished value claim allows you to recoup the difference between your car’s worth before and after a car accident. 

For example, let’s say you’re in a car accident that another driver caused. You would file a liability claim against that driver’s car insurance to cover repairs to your car. And if you believe the accident drove down the car’s market value, then you’d file a diminished value claim with their insurer, too. 

That’s because you might want to sell your car later, and a hypothetical buyer “can factor that reduction of value into their negotiation and pay you X number of dollars less for the vehicle,” says Matthew Groves, a vice president at the Colorado Auto Dealers Association. 

Once you file your claim, the insurance company would use its own diminished value claim calculation to determine your payout.

Types of Diminished Value Claims

There are three main types of diminished value claims:

Inherent diminished value

This type of claim refers to the car’s market value once it’s repaired after an accident. Even if the car is “good as new” after repairs, the accident history decreases the car’s worth for potential buyers. This is the most common type of diminished value claim.

Repair-related diminished value

If your mechanic uses low-quality parts or otherwise provides substandard repairs on your car, you may experience repair-related diminished value. This diminished value assumes the vehicle can’t be totally restored to its original condition. 

If you own an expensive car, such as a Tesla, Mercedes, or Porsche, “you want to be sure that when you get repairs done, it’s with Porsche parts or Tesla parts or Mercedes parts and not generic parts,” says Janet Ruiz, director of strategic communication at the Insurance Information Institute. “Those sometimes will diminish the value of your luxury cars.”

Immediate diminished value

This type of claim refers to the resale value immediately after your car is involved in an accident, before it gets repaired. Because you’ll likely get your car repaired, this type of claim is rarely used.

When Should You File a Diminished Value Claim?

If you’ve been in a car accident, you might consider filing a diminished value claim. But it’s not the right move for everyone. Consider these factors first:

  • Your car’s value before the accident: Older cars with a lot of mileage or structural damage are worth less than newer cars with no accident history. It might not make sense to file a diminished value claim because you might not get much compensation in return.
  • Who was at fault: Your insurance company won’t process a diminished value claim if you’re at fault for the damage. So if you caused a multi-car accident or backed into the side of your house, for example, you won’t be eligible to file this type of claim. 
  • Your state’s laws: Every state has different rules about diminished value claims and how they’re calculated. Your best bet is to ask a lawyer about your options or visit your state’s government website and research laws surrounding these claims. 
  • Whether the other driver is insured: If the other driver is at fault but doesn’t have car insurance, check whether your policy includes uninsured motorist coverage. If it does, then you’d file a diminished value claim with your own insurer.

How to File a Diminished Value Claim 

If you decide to file a diminished value claim, “deal with it at that time and act fast,” Zander says. It’s often easier to collect documentation and present your case within a few days following the accident. The value of your car could also further drop if you wait to file a claim. Here are the steps you can take to file a diminished value claim:

Pro Tip

Documentation can help you file a successful claim. Keep files that help you prove the value of your car, and after a car accident, document the scene to help establish fault. Take photos of both cars, a closeup of any damage, the position of the cars, and anything else that supports your claim.

1. Determine who was at fault. Insurance companies determine who caused the accident based on state laws and the details of the accident. You might be able to speed things along by providing a copy of the police report and other documentation, Groves says. “Take pictures, get statements, and grab the other person’s insurance information,” he says. You can ask witnesses to provide a statement, too. 

That’s also why it’s important to call the police when you’re in an accident. They’ll “come out and talk to the people in the accident and look at the site,” Ruiz says. “You can tell a lot of things by where the cars were hit and where the skid marks are,” which can help the insurer determine fault.

2. Check state laws. Research the laws in your state to better understand your rights regarding the diminished value of your vehicle. To do this, head to your state’s government website and find the Division of Insurance for information, or plug “diminished value claim [state name]” into a search engine. 

3. Check the insurer’s rules. You’ll file a claim with the at-fault driver’s insurance company, so call them and ask how it usually handles this type of claim and what you need to provide. If the other driver in the accident was uninsured, check whether you have uninsured motorist coverage. If you do, then you’ll file the claim through your own insurance company. 

4. Gather your documents. Next, you’ll need to calculate the car’s value (from before the accident) and gather the paperwork for the claim. Documents may include photos from the accident scene, a copy of the police report, and a bill from the repair shop.

5. Find your car’s diminished value. To do this, you can hire a licensed appraiser to calculate your car’s diminished value. “Your local car dealerships and body shops are good places to do research as well,” Ruiz says. Either way, ask for a signed report to support your claim. Keep in mind: Any fees you pay for these services eat into any claim payout you receive, so make sure it’s worthwhile. 

6. File the claim. Follow the insurance company’s instructions for filing the claim, and be responsive if they ask any questions. This can improve your chances of being compensated for your loss.

7. Wait for a response. This type of claim could take weeks or months to finalize, so stay in touch with the claims handler. Ask for updates every few weeks. If you’re having trouble communicating with the insurance company, you may need to hire a lawyer as an intermediary.

How Diminished Value Claims Are Calculated

There’s no one industry-wide diminished value calculator, and insurance companies generally won’t provide the formula they use, Zander says. “It’s like saying, ‘here’s our playbook of how we handle things,’” he says. 

But some insurers might use the 17c Diminished Value Formula as a guide. The name and formula comes from a Georgia car insurance case State Farm Mutual Automobile Insurance Company v. Mabry et al. You can use the “17c formula” to calculate diminished value and get an idea of how much you’d receive when filing a claim:

Step 1: Calculate the value of your car.

Use a third-party tool, such as Kelley Blue Book, to find the market value of your car after the repairs are completed. Their calculators crunch the numbers for you. Just enter the car’s make and model, year, mileage, and the extent of damage in the accident. Let’s take a look at one example and say your car is worth $25,000. 

Step 2: Apply a 10% cap to that value.

Next, apply a 10% cap to the market value you’ve calculated. This is known as the base loss of value. In our example, that works out to:

$25,000 x 0.10 = $2,500

The $2,500 represents the maximum amount you can get in a diminished value claim.

Step 3: Apply a damage multiplier.

The insurance company will further reduce your payout based on the extent of damage to your car. In our example, let’s say your car had minor damage. Less damage translates to a lower diminished value, so your payout will be lower compared to a car with major damage. Using the table below, the adjusted diminished value works out to: 

$2,500 x 0.25 = $625

MultiplierDamage level
1.00Severe structural damage
0.75Major damage to structure and panels
0.50Moderate damage to structure and panels
0.25Minor damage to structure and panels
0.00No structural damage

Step 4: Apply a mileage multiplier.

Although third-party services consider your mileage when estimating your car’s value, insurance companies do their own adjustment based on this factor. Take the mileage on your car — you can find it on the dashboard odometer — and multiply it by a mileage multiplier to find the final diminished value of your vehicle. 

In our example, we’ll assume you’ve only driven 25,000 miles on this car. After applying the mileage multiplier, here’s the final adjusted value:

$625 x 0.80 = $500

1.000–19,999 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

How to Get the Most Money Out of Your Diminished Value Claim

The insurer that’s processing the claim — often on behalf of the other driver who caused the accident in the first place — is “not going to go out of their way to educate you on more things that you can do so that your claim can be higher,” Zander says. “But you can reach out to your own agent, even if you’re not filing a claim with them, and ask them to help you.”

You can also consider hiring a lawyer to help you manage the process and get a fair payout. But this usually makes sense only if you own an expensive car that was extensively damaged in an accident. 

Are Insurance Companies Required to Pay a Diminished Value Claim? 

Insurance companies might be required to pay a diminished value claim, depending on state laws and who was at fault. Check these two places to find out:

  • Your car insurance contract. Car insurance companies typically won’t cover diminished value claims if you’re at fault in an accident. But if another driver causes an accident, you can file a diminished value claim against their insurance policy. 
  • Your state laws. All states except Michigan allow drivers to file a diminished value claim if another party is at-fault. This would usually be included in the liability portion of an insurance policy. Since every state handles diminished value differently, so check with your state insurance commissioner’s office for more information.

Bottom Line

Filing a diminished value claim can be time-consuming, and you might not get much in your payout. Before going through this process, make sure it’s worth your time. You’ll need to establish fault and the value of your car, and make sure you’re following state laws for this type of claim. Then get the paperwork filed right away, so the insurance company can process your claim, send you a payout, and make you whole.