Immediate Diminished Value

This is the difference in the value of the car immediately before and after the accident. It’s the value before any repairs have been made. This type of diminished value is rarely used in claims because insurance companies usually provide repairs right after an accident.

Inherent Diminished Value

Also known as “residual diminished value” or “stigma damage,” this is the most common form of diminished value in claims. It assumes the car has been repaired back to its original condition, but because the car’s history now shows that it’s been in an accident, buyers will assign it a lower value. This means that you’d get less for the car if you tried to sell it or trade it in.

This is the lost value that results from poor-quality repairs. Let’s say that the paint color is not a perfect match, or aftermarket parts were used in the repairs. In these cases, the repair lowered the value beyond the fact of the accident alone.

How a Diminished Value Claim Works

A claim for inherent diminished value asks for compensation if a car is repaired after an accident but still suffers an actual or perceived loss of value compared to its pre-accident value.

Alternate name: Diminution in value

Even if you don’t tell a potential buyer about the damage to your vehicle, they’ll likely still find out when they run a CARFAX report on the car, as is often advised. The report reveals everything about an accident, such as:

Accident historyStructural damageSevere to serious damagesDamage location(s) and repairs

The buyer may worry that the repairs weren’t high quality or didn’t or couldn’t address unseen problems. State law and your policy determine how a diminished value claim works. In general, if you weren’t at fault in an accident and the other driver has insurance, you file your diminished value claim with the at-fault party’s insurer. If you were at fault in an accident, your insurer might not be required to pay for your diminished value—but as mentioned, much is up to your policy and state case law. For example, in Missouri, if you badly damage your car by sideswiping a guardrail, your insurer isn’t required to pay for the difference between the pre-accident and post-accident value. If the other driver is at fault, you may be able to recover diminished value if you are able to prove your case. For example, in Missouri, if you badly damage your car by sideswiping a guardrail, your insurer isn’t required to pay for the difference between the pre-accident and post-accident value. But if another vehicle sideswiped yours and caused the same damage, the at-fault car’s insurer will likely be required to help make up the difference in value.

Example of a Diminished Value Claim

Another driver hits your car, currently valued at $25,000. The at-fault driver’s insurance pays the $3,000 repair bill. However, you discover the car is now only worth $21,000 due to the accident, even if it looks restored. The diminished value claim could help you recoup some of those losses, even if you weren’t planning on selling the car soon. You could file a diminished value claim with the at-fault driver’s insurance. However, you must generally prove that your car has lost value. Depending on your state, you may be able to do this through a couple of approaches:

Getting an auto dealership sales manager’s written estimate of the price that would be offered for the vehicle if it hadn’t been in an accident versus the price post-accident and repairsHiring an independent appraiser who specializes in diminished value to write an appraisal of the diminished value amount

While you can provide evidence and estimates of the change in value, the insurer has the final word on what that value payout will be. Diminished value claims can be denied for many reasons:

Your state is one that doesn’t have legislation or case law requiring car insurers to pay a diminished value claim.You’re at fault for the accident.You’re missing the required documentation.The value didn’t change much.

Not every car insurance company in every state will cover diminished value claims, and only some states explicitly offer case decisions regarding diminished value. Even if you have documented the loss of value, an insurance company can still argue against your claim. Speak with a lawyer for legal advice regarding your policy or situation.