Lauren Lewthwaite Last Updated On: August 24, 2023

Home / Blog / Auto Insurance / What Is a Diminished Value Claim?

How to File a Diminished Value Claim & More

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Your vehicle starts depreciating the second you drive it off the lot. This means, if you were to turn around and immediately sell it, you would lose money. But if your vehicle is involved in an accident, your vehicle’s value drops even more. 

This is why there’s a process to help drivers recover some of the money they lose in accidents they didn’t cause. Keep reading for a detailed guide on diminished value claims, how to file one, and if they’re worth the effort.

Let’s get started.

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What Does Diminished Value Mean?

The meaning of diminished value is simple, but pretty important to car owners. Diminished value refers to the difference in your vehicle’s value before and after an accident. Even if the highest quality repairs were completed and your car is essentially good as new, it still suffers diminished value.

If you’re planning to keep your vehicle forever, this might not matter much to you—after all, as long as your car drives well and looks normal again, you’re happy. But if you do ever plan on trading in your vehicle or selling it down the line, diminished value is important. 

Types of Diminished Value

The fun doesn’t end there. Your car loses value after an accident, but there’s different types of diminished value, or ways that it depreciates.  These include:
  • Immediate Diminished Value: This is the difference in value right after an accident and before the vehicle is repaired. Most insurance providers do not use this value because they would usually repair the vehicle, as long as you have the right coverage.
  • Inherent Diminished Value: This is the standard form of diminished value, which represents the difference in value for a vehicle after an accident and after repairs. It assumes repairs were of top quality and the vehicle was restored as much as it can be.
  • Repair-Related Diminished Value: This covers the difference in value after an accident and after low-quality repairs were performed. This can easily happen if paint colours can’t be matched or if aftermarket parts are used rather than OEM (original equipment manufacturer) parts. This means that now the vehicle has lost even more value than it did just because of the accident. 
Seeing your car lose value over an accident, especially if you didn’t cause it, can be frustrating as a car owner. This is where a diminished value claim comes in, which we’ll explore next.

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What Is a Diminished Value Claim?

Although it can be upsetting to see your car lose value after an accident, you have options. You might want to consider filing a diminished value claim, because it can help you recover some of that lost value after an accident. 

A diminished value claim is an insurance claim you file after an accident occurs and usually before repairs are completed. It is designed to compensate owners for the loss in value after an accident. 

But before you get too excited, there’s a few key things to note about these claims:

  • If you are at fault for the accident, your claim will probably be denied.
  • Most of the time, you file with the other driver’s insurance company. 
  • If your vehicle is older or already had damage before the accident, your claim may be denied. 
  • Every state has different rules around diminished value claims, although almost every state allows for some form of diminished value claim. 
  • It’s best to file as soon as you can after an accident, because this improves your chances of the claim being approved (and because your vehicle is constantly depreciating). 

Still think a diminished value claim is right for you? Next, we’ll review exactly how to file one.

But first, make sure you have the right car insurance in place for the right price. Accidents can happen in the blink of an eye, and you want to make sure your insurance has your back. Get access to free quotes now. 

How to File a Diminished Value Claim

We have some bad news: filing a diminished value claim can be trickier than filing a normal car insurance claim. This is because it’s your responsibility to prove your vehicle’s diminished value, and it’s not a claim insurers love paying out so requirements can be high. 

But don’t worry, we’ll walk you through it! To start, you almost always file with the other driver’s insurance provider. This is because the other driver is at fault, so their insurance needs to pay for the diminished value of your vehicle. A reminder that if you’re at fault, your claim probably won’t be approved.

In some cases, you would file with your own insurance provider, such as getting into an accident with an uninsured driver (you probably need uninsured motorist coverage), or if you’re the victim of a hit-and-run. 

Here are the steps to filing a diminished value claim after an accident: 

  1. Contact the insurance provider for the process of filing a diminished value claim.
  2. Calculate your vehicle’s market value. 
  3. Gather proof of your vehicle’s diminished value, including pictures, reports, appraisals, and more, and submit. 

Once filed, the insurance provider will let you know if approved or denied, or they might ask you for further documentation. 

How to Calculate Diminished Value

You might want to get a rough idea of how much your diminished value claim payout might be, which is why we’ll show you how to calculate that value yourself. 

The most common way to determine diminished value is the 17c Diminished Value Formula:

  • Calculate the current market value of your vehicle using online tools such as Kelley Blue Book. 
  • Apply a 10% cap to that value, also referred to as the base loss of value. This is the most the insurance provider will pay on the claim.
  • Use a damage multiplier to adjust the value after the 10% cap. This multiplier is based on how damaged your vehicle is:
    • 1.00 for severe structural damage
    • 0.75 for major damage to structure and panels
    • 0.50 for moderate damage to the same
    • 0.25 for minor damage to the same
    • 0.00 for no structural damage
  • Use a mileage multiplier to adjust the value even further:
    • 1.00 for 0-19,999 miles
    • 0.80 for 20,000-29,999 miles
    • 0.60 for 40,000-59,999 miles
    • 0.40 for 60,000-79,999 miles
    • 0.20 for 80,000-99,999 miles
    • 0.00 for over 100,000 miles

This means that if your vehicle was worth $20,000, had major damage, and 45,000 miles on it, your max diminished value payout would likely be $900. This amount is designed to help you recover the lost value of your vehicle.


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Is Filing a Diminished Value Claim Worth It?

If your claim is solid, then yes, it’s usually worth it. Your vehicle has lost value and it wasn’t your fault, so you should be compensated for this even more than just having your vehicle repaired. 

Plus, since you are filing with the at-fault driver’s insurance provider, your own insurance doesn’t go up as a result of the diminished value claim. 

Not all claims get approved, since it can be tough to prove diminished value, so be prepared for that outcome if you do file a claim. You might also need to be prepared to wait: these types of claims can take longer than other auto insurance claims to resolve, so expect that you might be waiting weeks or months for a resolution.

Final Thoughts: Diminished Value Claim

A car accident can be upsetting as it is, but to also see your vehicle lose value over an accident you didn’t cause can add a new layer of frustration to the accident. Even though your insurance might repair the vehicle as much as it can, it loses value just by virtue of having been in an accident. 

A diminished value claim can help you recover some of that lost value. The process isn’t always easy, but if you succeed, it can help put you back in the same financial position you were in before the accident. 

So can great car insurance. If your insurance isn’t meeting your needs, switching is easier than you might think. Start with access to free quotes here, so you can figure out if it’s time to uplevel your car insurance.

Lauren Lewthwaite Lauren Lewthwaite has been freelance writing for almost five years writing content that ranges from health to insurance and everything in between. Lauren is also a trained translator in French and English and is a dog-mom to an adorable Australian Shepherd.

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