After a vehicle accident, having your car repaired may not put it in the same condition as before the accident—at least not in the perception of buyers or appraisers. Even if the repairs are flawless, your car may lose resale value just because it now has an accident record. This damage is referred to as diminished value, and under your state and insurance circumstances, you might have the right to make a claim for diminished value to get compensation for the loss of money.
This book will delve into the categories of diminished value, how diminished value claims function, the requirements to qualify, filing, and compensation expectations.
What Is a Diminished Value Claim?
A diminished value claim is a demand for compensation based on the reduction in your vehicle’s market value after it has been damaged in an accident and repaired. The claim seeks to recover the difference between what your car was worth before the accident and what it is worth after repairs.
For example, if your car was worth $20,000 before an accident and is only worth $17,000 after being professionally repaired, you may be entitled to claim the $3,000 difference as diminished value.
Types of Diminished Value
There are three main types of diminished value:
1. Inherent Diminished Value
This is the most common type of diminished value claim. It accounts for the loss in value due to the mere fact that the vehicle now has an accident history. Even if repairs are done flawlessly, buyers and dealers often devalue such vehicles.
Example: A well-maintained sedan that was in a collision may be considered less desirable than a similar vehicle with a clean history, regardless of the repair quality.
2. Repair-Related Diminished Value
This occurs when the repairs themselves are substandard or incomplete, affecting the car’s value. It might involve mismatched paint, use of aftermarket parts, or compromised structural integrity.
Example: A luxury car repaired with lower-quality parts may lose more value than if OEM parts were used.
3. Immediate Diminished Value
This type refers to the reduction in value immediately after the accident, before any repairs are completed. It’s less commonly used in legal or insurance contexts because most claims focus on post-repair value loss.
When Can You File a Diminished Value Claim?
Your eligibility to file a diminished value claim largely depends on who was at fault, the state you live in, and the type of insurance coverage involved.
If You Were Not at Fault
- In most states, if another driver caused the accident, you can file a diminished value claim with their liability insurance.
- These claims are part of your right to be “made whole” after a loss.
If You Were at Fault
- Your own insurance may not cover diminished value unless you have specific coverage or live in a state that allows it.
- Most standard collision policies do not include diminished value unless explicitly stated.
State Laws Matter
States vary significantly in how they handle diminished value claims:
- Georgia: Recognizes and often awards diminished value for not-at-fault drivers.
- California, Texas, Florida: Allow diminished value claims under certain conditions.
- Michigan, New York: May prohibit or severely restrict such claims due to no-fault insurance laws.
Always check your state’s laws or consult an attorney or claims specialist.
How to Prove Diminished Value
Proving diminished value requires documentation, valuation, and sometimes expert testimony. Here’s how you can support your claim:
Step 1: Gather Evidence
- Pre-accident valuation (Kelley Blue Book, NADA Guides, or recent sales of similar vehicles)
- Post-repair valuation (from a certified appraiser or dealership)
- Repair records and invoices
- Accident report and photos
Step 2: Obtain a Professional Appraisal
An independent auto appraiser can assess the car’s diminished value. This report can be powerful evidence in your claim, especially if the insurer disputes your valuation.
Step 3: Present the Claim
Submit the diminished value claim along with your appraisal, supporting documents, and a detailed letter outlining the loss. Be prepared to negotiate.
How Insurance Companies Respond
Insurers often push back on diminished value claims. They may:
- Deny the claim outright, especially if you’re filing under your own policy.
- Offer a lowball settlement based on their in-house valuation tools.
- Request their own appraisal, which may be lower than yours.
This is where documentation and persistence come in. Negotiating or hiring an attorney or appraiser can significantly improve your chances of fair compensation.
How Much Can You Recover?
The amount recoverable in a diminished value claim varies based on:
- The age and mileage of the vehicle
- Pre-accident condition and market demand
- Severity and nature of the damage
- Quality of repairs
As a rough guideline:
- Newer vehicles (under 5 years old) with significant repairs often see the most value loss.
- Luxury and sports cars can experience higher diminished values due to brand perception and resale market sensitivity.
- Older vehicles may not qualify for diminished value if their pre-accident value was already low.
Some insurers use formulas like the 17c Formula (commonly used by State Farm), though critics argue that it undervalues claims. Independent appraisals are often more accurate.
How Long Do You Have to File?
Most states apply the same statute of limitations to diminished value claims as they do to other property damage claims—typically 2 to 4 years. However, acting quickly is crucial. The sooner you file, the easier it is to obtain accurate appraisals and documentation.
Steps to File a Diminished Value Claim
- Check your state laws and insurance policy.
- Determine fault and identify the liable party’s insurer.
- Obtain a professional diminished value appraisal.
- Write a demand letter with supporting documentation.
- Submit the claim to the insurance company.
- Negotiate if needed—or escalate.
If the insurer refuses to pay, you may:
- Hire an attorney
- File a complaint with your state’s Department of Insurance
- Take the matter to small claims court (depending on the amount)
Sample Demand Letter Tips
Your demand letter should include:
- Your contact information
- Policy and claim number
- Vehicle details and accident date
- A concise explanation of diminished value
- The amount requested (with attached appraisal)
- A deadline for response (typically 10-14 days)
Keep your tone professional and factual. Avoid emotional language and threats.
When to Hire a Lawyer
Consider hiring a lawyer if:
- Your claim is denied or underpaid
- You’re unsure of your rights under state law
- The damages are significant (e.g., luxury or high-value vehicles)
- You suspect insurer bad faith
Many attorneys offer free consultations and only charge if you win a settlement.
Tips to Protect Your Vehicle’s Value
- Choose a certified repair shop with OEM parts.
- Document everything during the repair process.
- Request before-and-after photos for your records.
- Avoid multiple accidents—diminished value stacks with each incident.
- Maintain your vehicle regularly post-repair to retain its remaining value.
Common Myths About Diminished Value
Myth 1: “Insurance always pays for diminished value.”
Truth: Most insurers only pay when their policyholder is at fault—and even then, it depends on state law.
Myth 2: “Once the car is fixed, it’s worth the same.”
Truth: Accident history significantly impacts resale, even after perfect repairs.
Myth 3: “I can’t claim diminished value if the car wasn’t totaled.”
Truth: Even minor collisions can reduce a vehicle’s resale value.
About the Author
Neil Bhartia
Neil Bhartia isn’t your typical, stuffy attorney that you see on TV. While some have their sights exclusively on money and treat their clients like a number, Neil takes a personal interest in every single client he has. As an empath, Neil understands that people that seek legal help are typically in an involuntary, and stressful situation, and he goes out of his way to diffuse the stress and educate clients on each every detail of the legal process.
