What Is a Diminished Value Claim?

Your car’s value decreases after an accident, even if you have the damages repaired.

Diminished value is the value your car loses after an accident and related repairs. If another driver caused the accident, a diminished value claim could help you recover that loss in value from the other driver’s insurance company.

Vehicles lose value over time from normal wear and tear and mileage. Most new cars lose up to 60% of their value within the first five years of ownership, according to Kelley Blue Book.^[1]

Here’s what to know about diminished value insurance claims, including the different types and how it’s calculated.

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What is a diminished value claim?

When your car sustains damage in an accident, it automatically loses some of its worth, even if it’s later repaired and looks brand-new. This loss of worth is diminished value — the difference between a car’s market value before and after an accident, post-repairs.

If you sell or trade in the vehicle, you won’t get as much money from potential buyers due to its lower value. In this situation, you may choose to file a diminished value claim to collect the monetary difference between your car’s pre- and post-accident value. The value depends on the car’s worth before and after a collision.^[2]

When you can file a diminished value claim

A diminished value claim can help you avoid a major financial hit when reselling or trading in a damaged vehicle. But it’s not an option for every driver.

It might make sense to file a diminished value claim in the following scenarios:

• You’re not at fault. These claims are typically only viable if another driver caused the accident.

• Your car has a high value. You might have a better chance of getting a claim approved if you have a newer vehicle with low mileage.

• An uninsured driver caused the accident. Your chances of receiving a payout can be higher if an uninsured driver caused the property damage.

• State law allows it. Every state except Michigan allows these claims and has unique laws for diminished value claims.

Types of diminished value claims

Drivers can file different types of diminished value claims. Here’s an overview of a few main types of claims and what situations they apply to.

• Inherent diminished value claim: You ask an insurer to compensate you for the difference between the car’s post-accident value and what you could have sold it for before the accident. This is the most common type of claim.

• Immediate diminished value claim: This claim type applies when you want to collect money for your car’s loss in resale value right after an accident occurs and before repairs. You can take the insurance settlement and repair your vehicle anyway, so it’s essentially an extra step to have insurance pay for your repairs.

• Repair-related diminished value claim: If you have concerns about the quality of your car’s repairs following an accident, you can file a repair-related claim to recoup the loss of value. For example, the repair shop could reduce your vehicle’s value by using low-quality materials to repair frame damage instead of original equipment manufacturer parts.

How to calculate diminished value with formula 17c

Car owners can use formula 17c to calculate their vehicles’ diminished values. If you need to calculate your car’s diminished value, grab a calculator and complete the following steps:^[3]

1. Determine your car’s value

Some online resources have free fair value estimators, like KBB, CARFAX, and the National Automobile Dealers Association (NADA).

To find the market value, you’ll need to plug in basic information about your car, like the make, model, mileage, year, condition, trim package, and VIN.

2. Apply a 10% cap

Next, take 10% of the fair market value of your vehicle from step 1 to get the base loss of value. This represents the maximum payout an insurance company will provide when you file a claim.

In the diminished value formula, you can take the estimated value of your vehicle and multiply it by 10%. For example, if NADA shows that your car’s estimated value is $15,000, the base loss of value is $1,500.

Here’s the simplified formula: Estimated value × 0.10 = Base loss of value

3. Apply the damage multiplier

Next, you’ll need to find the damage multiplier. Auto insurance companies use the damage multiplier to better determine the diminished value of your vehicle based on the specific type of damage from the accident. Every car insurance company uses the same system of damage multipliers.

Damage multipliers range from 0.00 to 1.00, with 0.00 representing no structural damage and 1.00 representing the most significant damage. Once you find the damage multiplier for your car, you need to multiply that figure by the 10% cap value.

For example, let’s say your car’s base loss of value is $1,500, and it has major structural damage. In this case, the damage multiplier is 0.75. To complete the next step of the formula, multiply $1,500 by 0.75 to find the adjusted loss of value, which is $1,125.

Below, you can view the multipliers for various levels of damage.

4. Apply the mileage multiplier

The last step is to apply the mileage multiplier. Insurance companies use this figure to determine how your car’s mileage will affect its resale value. You can find the mileage multiplier for your car in the table below:

Final calculation

Using formula 17c, let’s complete the calculation for the diminished value of a vehicle using the following vehicle information:

• Original car value of $15,000

• Damage multiplier of 0.75 from sustaining major damage in an accident

• 42,000 miles and a mileage multiplier of 0.60

The base loss of value for the car is $1,500 ($15,000 × 0.10 = $1,500). That’s the maximum payout you could receive from an insurance company.

The value adjusted for the car’s major damages is $1,125 ($1,500 × 0.75 = $1,125).

Finally, the car’s adjusted value for its mileage is $675 ($1,125 × 0.60 = $675).

That means the car’s diminished value is $675, and this is the amount you could receive from an insurance company.

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How to file a diminished value claim

Filing a diminished value claim is more complicated than a standard collision claim because you need to prove your car’s diminished value.

Follow these steps to file your claim:

1. Contact the insurer of the at-fault driver. Ask a company representative about the claim filing process, what documentation to provide, and what rights you have when filing.

2. Gather your documents. You’ll need to present evidence to support your case, including photos of the vehicle damage or accident scene and the police report.

3. Calculate your car’s diminished value. Use a site like NADA or KBB to find the car’s pre-accident fair market value. Then, use formula 17c to calculate the lost value.

4. Have your car appraised. Even if the insurance company doesn’t require a vehicle appraisal as part of the claim, having a vehicle appraisal from a dealership or certified appraiser can help support your claim.

5. Submit the claim. Follow the insurer’s instructions and include the required paperwork to avoid delays. Then, wait for a response from the insurer.

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