What Is a Diminished Value Claim?

Elizabeth Rivelli
Elizabeth Rivelli
  • 5+ years writing insurance and personal finance topics

  • Auto, home, health, and life insurance expertise

Elizabeth has extensive insurance industry experience, having written for Insureon, Rate Retriever, and Insurify. She’s also finance and insurance editor for Car and Driver.

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Courtney Mikulski
Courtney MikulskiSenior Editor, Auto
  • 3+ years producing insurance and personal finance content

  • Main architect of the Insurify Quality Score

Courtney’s deep personal finance knowledge extends beyond insurance to credit cards, consumer lending, and banking. She thrives on creating actionable content.

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Updated January 30, 2023 at 11:00 AM PST

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When your car is damaged in an accident, its value falls, even if you have it completely repaired. 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.

Most cars 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]

Your car’s accident history can also cause the value to decrease dramatically, depending on the damage. The value of your car after an accident is called diminished value, and it represents what your car is worth after it’s repaired.[2]

If you want to file a diminished value claim after an accident, there are a few things you should know. Here’s what a diminished value claim is, how it works, the types, and how it’s calculated.

Quick Facts
  • Diminished value claims can help you recoup your car’s loss in value after an accident.

  • Most claims are only approved if you were not at fault in a collision.

  • You’re responsible for calculating your car’s diminished value when you file a claim.

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 called diminished value.

The diminished value of your vehicle is the difference between its 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 diminished value.

In this situation, you may choose to file a diminished value claim, which allows you to collect the monetary difference between your car’s pre- and post-accident value. Essentially, it should prevent you from losing money because of the car’s lowered worth.[2]

You might want to pursue this option in several situations. The most common situation is after an accident in which another driver was at fault. You might also file a diminished value claim if your vehicle is newer and loses a significant amount of value after a crash.

Diminished value is an inherent part of all car insurance policies. It’s not a type of coverage. Every vehicle damaged in a covered insurance loss will have a diminished value. However, the value depends on the car’s worth before and after a collision.

Types of diminished value claims

Drivers can file several different types of diminished value claims, and some are more common than others. Here’s a quick overview of the various diminished value claims and what situations they apply to.

Inherent diminished value

After an accident, your car’s value will drop. This is true for almost any vehicle, regardless of the make and model. With an inherent diminished value claim, you’re asking an insurance company to compensate you for the difference between the car’s post-accident value and what you could have sold it for before the accident occurred.

An inherent diminished value claim is the most common. However, it’s usually only feasible if you weren’t responsible for the crash. If you were at fault, the insurance company will likely deny your diminished value claim.

Immediate diminished value

An immediate diminished value claim is for when you want to collect money for your car’s loss in resale value right after an accident occurs and before repairs. You could take the insurance settlement for an immediate diminished value claim and repair your vehicle anyway, so it’s essentially an extra step for insurance paying for your car repairs.

If your car is repaired after an accident and there is some concern about the repair quality, you might file a repair-related diminished value claim.

For example, if the repair shop uses low-quality materials to repair frame damage, rather than original equipment manufacturer (OEM) parts, it could further reduce the value of the car. In this case, filing a repair-related diminished value claim could help you recoup the loss in value due to using poor-quality auto parts.

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How to calculate diminished value

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 follow these three steps:

1. Determine your car’s value

The first step is to determine your vehicle’s value. Some online resources have free valuation estimators, like KBB, CARFAX, and the National Automobile Dealers Association (NADA).

To find the market value, you’ll need to plug in some 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. This is called 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. Insurance providers use the damage multiplier to better determine the diminished value of your vehicle based on the specific type of damage from the accident.

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.

Here’s an example building off the numbers from the second step. 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.

Here’s the simplified formula: Base loss of value × damage multiplier = Adjusted loss of value of the vehicle

Every car insurance company uses the same system of damage multipliers. Here are the multipliers for various levels of damage.

DamageMultiplier
Severe structural damage1.00
Major structural and panel damage0.75
Moderate structural and panel damage0.50
Minor structural and panel damage0.25
No structural damage0.00

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 impact its resale value. You can find the mileage multiplier for your car in the table below:

MileageMultiplier
0 to 19,999 miles1.00
20,000 to 39,999 miles0.80
40,000 to 59,999 miles0.60
60,000 to 79,999 miles0.40
80,000 to 99,999 miles0.20
100,000+ miles0.00

Now that we’ve explained each step of formula 17c, we can put everything together.

For this example, let’s imagine your car’s original value is $15,000, which you found using a NADA calculator. Your car sustained major damage in an accident (a damage multiplier of 0.75). At the time of the crash, your car had 42,000 miles, which means the mileage multiplier is 0.60.

Using formula 17c for calculating diminished value, here’s a ballpark of what a claim would pay:

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 provider.

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.

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How to file a diminished value claim

The process of filing a diminished value claim is often more complicated than filing a standard collision claim. In addition to the paperwork that’s required, you also need to prove the diminished value of your car.

When you’re ready to file a diminished value claim, here are the steps you should follow:

1. Contact the correct insurance company. To start the claim process, you’ll need to contact the insurance company of the at-fault driver. Ask a company representative about the process of filing a diminished value claim, how it works, and what documentation you’ll need to get started. An agent should also explain the laws in your state, which may determine what rights you have when filing a diminished value claim.

2. Gather your documents. When filing a diminished value claim, you’ll need to present evidence to support your case. If you have photos of the vehicle damage or the accident scene, have those ready to submit to the insurance company. If there’s a police report, you should provide a copy of that, too.

3. Calculate your car’s diminished value. With most diminished value claims, the person making the claim is responsible for calculating their car’s diminished value based on its fair market value. Use a site like NADA or KBB to find the car’s pre-accident value, then use the formula above to calculate the lost value.

4. Get your car appraised. Some insurance companies require a vehicle appraisal as part of a diminished value claim. But even if it’s not required, it can help support your claim. If possible, have your car appraised in its post-accident state. Many car dealerships offer appraisals, or you can find a certified vehicle appraiser in your area.

5. Submit the claim. The final step is to submit the claim, following the instructions of the insurance company. Make sure to include all the required paperwork, which will help you avoid delays. Then, you’ll wait for a response from the insurer.

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When to file a diminished value claim

A diminished value claim can help you avoid a major financial hit when you resell a damaged vehicle. However, it’s not an option for every driver. Here are a few situations where it might make sense to file a diminished value claim:

  • Another driver was responsible. Diminished value claims are typically only viable if you weren’t at fault for the accident. If you were responsible for the crash, it’s often much harder to get a diminished value claim approved.

  • Your car has a high value. You might have a better chance of getting a diminished value claim approved if your vehicle is newer and has low mileage. These vehicles tend to have higher values. On the other hand, if you have an older or high-mileage vehicle, the insurance company may be more likely to deny your claim.

  • An uninsured driver caused the accident. If a driver without car insurance caused the accident, your chances of receiving a diminished value payout can be higher. However, this isn’t guaranteed.

  • State laws allow for diminished value claims. Diminished value claims are allowed in all states except Michigan, but each state has unique laws around this type of claim. Before you file a claim, it’s a good idea to review the diminished value laws in your state.

Diminished value claim FAQs

Here are answers to some commonly asked questions about diminished value claims.

  • How do you calculate the diminished value of a car?

    You can use formula 17c to calculate the diminished value of your vehicle. Start by finding the estimated market value of the car. Then, find the base loss of value, which is the car’s market value multiplied by 10%.

    Next, calculate the value adjusted for the car’s damage, using the correct damage multiplier. The last step is to find the car’s adjusted value for its mileage by multiplying the car’s adjusted damage value by the correct mileage multiplier.

  • Is diminished value negotiable?

    It might be possible to negotiate your car’s diminished value. However, it depends on the specific situation and your insurance company. If you want to negotiate for a higher payout, you need to back up your argument with proof of your car’s diminished value.

  • What does diminished value mean in insurance?

    The diminished value of your car is the difference between the fair market value before a crash and the value after an accident once the necessary repairs are made. Filing a diminished value claim allows you to recoup the money you would lose when selling your vehicle after the accident, even once it’s restored.

  • How do you file a diminished value claim after a car accident?

    To file a diminished value claim, you must contact the insurance company of the driver who caused the car accident. An agent will walk you through the process of filing a claim and what information is required. You’ll need to calculate the diminished value of your vehicle and potentially have your car appraised by a certified appraiser.

  • How long does a diminished value claim take?

    Diminished value claims can take a few weeks or a few months to process. The amount of time it takes depends on a number of factors, including the type of diminished value claim and the insurance company. If you haven’t received an update from the insurance company after several weeks, it’s a good idea to check in.

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Methodology

Insurify data scientists analyzed more than 90 million quotes served to car insurance applicants in Insurify’s proprietary database to calculate the premium averages displayed on this page. These premiums are real quotes that come directly from Insurify’s 50+ partner insurance companies in all 50 states and Washington, D.C. Quote averages represent the median price for a quote across the given coverage level, driver subset, and geographic area.

Unless otherwise specified, quoted rates reflect the average cost for drivers between 20 and 70 years old with a clean driving record and average or better credit (a credit score of 600 or higher).

Liability-only premium averages correspond to policies with the following coverage limits:

  • Bodily injury limits between state-minimum rates and $50,000 per person, $100,000 per accident
  • Property damage limits between $10,000 and $50,000
  • No additional coverage
Full-coverage premium averages correspond to the same bodily injury and property damage limits in addition to:
  • Comprehensive coverage with a $1,000 deductible
  • Collision coverage with a $1,000 deductible

Quotes for Allstate, Farmers, GEICO, State Farm, and USAA are estimates based on Quadrant Information Services’ database of auto insurance rates.

Sources

  1. Kelley Blue Book. "How to Beat Car Depreciation." Accessed January 27, 2023
  2. III. "What is diminished value?." Accessed January 25, 2023
Elizabeth Rivelli
Elizabeth Rivelli

Elizabeth Rivelli is a freelance writer covering insurance and personal finance. She has extensive knowledge of various insurance lines, including property and casualty, health, and life insurance. Her byline has been featured in dozens of publications, including Investopedia, Forbes, Bankrate, NextAdvisor, and Insurance.com

Courtney Mikulski
Edited byCourtney MikulskiSenior Editor, Auto
Courtney Mikulski
Courtney MikulskiSenior Editor, Auto
  • 3+ years producing insurance and personal finance content

  • Main architect of the Insurify Quality Score

Courtney’s deep personal finance knowledge extends beyond insurance to credit cards, consumer lending, and banking. She thrives on creating actionable content.

Featured in

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