Will Your Car Insurance Cover a Diminished Value Claim?

A decreased value claim compensates a driver for a decrease in the resale value of their vehicle due to an accident. If you've been in a car accident, the value of your vehicle has decreased. Even after being repaired, the vehicle is now considered to have an accident history. This reduces the resale value in the eyes of buyers. The decreased value is the amount your car's market value has depreciated as a result of being in an accident.

How Does a Car Get 'Diminished Value?

The resale value of a car is referred to as its decreased value. Some believe that an automobile's lower value after an accident is attributable to repairs with aftermarket parts. However, this is not the sole cause. The primary reason is that it was involved in an accident. Even a car that has been repaired at a dealership using authorized original parts will have a lower value than an identical automobile that has never been in an accident.

3 Types of Diminished Value: Definitions

An automobile's value might be reduced in three ways due to a car accident (or when you file a claim).

Immediate Diminished Value

This is the car's worth difference after the accident and before any repairs.

Inherent Diminished Value

This presupposes the car has been restored to its original state. The only reason the value is lower is that the vehicle was involved in an accident. Buyers perceive a lower value; hence the value is reduced. If you sought to sell or trade-in the car, you'd get less for it.

Repair-Related Diminished Value

This is the value lost due to poor repair quality. Assume that the paint color isn't a perfect match. Perhaps aftermarket parts were used in the repairs. In some circumstances, the repair costs more than the accident itself.

Why Does a Car Have Diminished Value?

The only reason a car's value has decreased is that it has been in an accident. When your car is posted for sale after an accident, its value drops. Repairing the car will not restore its worth. Being involved in an accident that necessitates repair has resulted in a lower resale or trade value. Other cars that have never been in an accident will sell for more than yours.

Example of Diminished Value After a Car Accident 

Consider the following example. You have a brand-new vehicle. After an accident, your insurance company will repair your vehicle. It has been restored to its original state. Then you go to sell your car. When the new buyer uses the VIN to look up the car's history report, they will discover that it was involved in an accident. They will not pay the same market value if they see this. In the worst-case situation, some purchasers will not purchase your vehicle. In this situation, your vehicle has suffered more than simply physical damage. It has also suffered a value drop. Following a claim might have several consequences for the value of your vehicle. After you've learned about how this can influence your car's value, you can try to get compensated for the loss. Making a diminished value insurance claim is one way to accomplish this.

What Is a Diminished Value Insurance Claim?

A decreased value insurance claim is when you ask your automobile insurance provider to reimburse the difference between your car's pre-accident value and its current worth after it has been repaired. For newer vehicles, this worth can be in the thousands of dollars.

Will the Insurance Company Pay My Claim?

Following a claim, you may be entitled to compensation for the diminished value. This is partly determined by the state in which you live. Each jurisdiction and insurance company has its own set of rules. In most jurisdictions, your insurance company will evaluate who caused the collision when determining whether or not to pay a reduced value. They may not pay at all in other states. The wording of an automobile insurance contract in most jurisdictions prohibits coverage for a lower value if you are at fault. To learn more about your state's insurance laws, contact the state insurance commissioner's office.

What if You Are Not Responsible?

If you were in an irresponsible accident, your insurance company is more likely to pay your claim. If someone else is to blame for your loss, you may be able to sue the third party or their insurer. Always request that your insurance company pay your claim first. It could save you a lot of time and worry. To assess reduced value, most insurers will use a formula. It would help if you inquired with your insurance carrier about the formula. Check with your insurance company to see what their procedure is. If you want a second opinion, contact your state's insurance commissioner's office. They will explain how things work in your state.

What About Uninsured Motorists?

If an uninsured driver caused your accident, discuss filing a diminished value claim with your insurance provider.

What if You Are at Fault?

If you are at fault, you may have difficulty collecting from your insurance. You could consult your lawyer if you have legal insurance or access to legal counsel. Based on your state legislation, they will be able to inform you if you are likely to be compensated. It never hurts to inquire about what your insurer is willing to do. However, this case is less likely to pay out most of the time. Your insurance policy may also exclude compensation for diminished values due to a negligent accident.

How to Get Paid by the Insurance Company

So, what should you do if you want to get compensated for the depreciation of your vehicle? First, check with your insurance company to determine if they provide this coverage. Some companies may already include it in their plans or as optional coverage.

How to Figure Out Diminished Value

If you wish to file a claim, you must first determine how much value your car has lost due to the collision. If your car is ancient and has little value, filing a claim may not be worth it. This is especially true if you want to go to court and pay legal fees.

2 Ways to Check the Diminished Value of Your Car

There are two methods for calculating the depreciation of your vehicle. One is more rapid but less exact. The other method takes longer but is more precise.

Look It up Online

Using an internet service like Edmunds or Kelley Blue Book is the quickest approach to obtain a quick idea. These websites can tell you how much your automobile is worth under typical circumstances. Then, since you've been in an accident, you can ask your car dealer for a trade-in value on your vehicle. This should indicate the lost value and help you decide whether it is worthwhile to file a claim. Remember that the trade-in value offered by the car dealer may not be the greatest rate. However, having their formal offer for your information is beneficial.

Get a Professional Evaluation

Consult with a company that specializes in insurance estimates for diminished value. (A fast Google search will yield several alternatives.) This is the best place to look if you need a precise figure. Ensure that your evaluator is qualified and accepted by insurance.

What States Will Pay Diminished Value Claims?

Georgia updated their policies to cover reimbursement for these claims following a class action lawsuit in 2001 (Mabry v. State Farm). Since then, many more insurers have agreed to examine a claim if the facts are favorable. Some states have agreed that insurers must pay the reduced amount. So, if you live in one of these states, you should be fine. You can contact your state insurance commissioner to determine if your state covers specific claims.

How Do You Make a Diminished Value Claim?

Begin by asking the insurance if they will compensate for diminished value. Find out how much the company is willing to pay if they will pay. Compare this to what you expect based on your research. If you accept their offer, you may proceed with the claim. How much you are willing to accept must be determined. If you do not accept the offer, you will be required to produce further information to support your claim. Inquire about how to proceed or how to obtain a second opinion. They will most likely have a procedure that you must follow.

What if Your Insurance Will Not Pay?

If you attempt to collect on a diminished value claim and your insurer denies you, contact your state insurance commissioner to learn about your options.

Frequently Asked Questions (FAQs)

How long do you have to submit a claim for a decreased car value?

Because a diminished car value claim is a property damage insurance claim, you have until the end of the statute of limitations in your state. This can range from two to ten years. The responsible party must examine their property damage insurance coverage to determine the minimal amount they will be required to pay.

Can insurance companies deny diminished value claims?

Insurance companies might deny diminished value claims if the paperwork is incorrectly filed, information is missing, or it is not completed on time. If you are denied or have issues with the settlement, speak with the insurer or a lawyer about your alternatives.

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