Diminished Value Claims Explained (2022)

Anna Baluch
Written by
Anna Baluch
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Written by
Anna Baluch
Insurance Writer
Anna Baluch is a Cleveland-based personal finance and insurance expert. With an MBA from Roosevelt University, she enjoys writing educational content that helps people make smart financial decisions. Her work can be seen across the internet on many publications, including Freedom Debt Relief, Credit Karma, RateGenius, and the Balance. Connect with Anna on LinkedIn.
John Leach
Edited by
John Leach
Photo of an Insurify author
Edited by
John Leach
Insurance Content Editor at Insurify
John Leach is an insurance content editor who has worked in print and online. He has years of experience in car and home insurance and strives to make these topics easy to understand for everyone. He has a linguistics degree from UC Santa Barbara.

Updated June 15, 2022

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There’s no denying that a car accident is stressful. In addition to vehicle damage and injuries, your car’s value may decrease, even if it’s restored to its pre-accident condition. That’s where diminished value comes in. Diminished value refers to the difference in your vehicle’s market value before and after an accident.

Depending on the details of the accident, an auto insurance company might pay for the diminished value of your car. To find a quality car insurance provider for your particular budget and needs, you can compare car insurance quotes online.

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Quick Facts

  • A diminished value claim can allow you to recover the difference between your car’s pre-accident value and current value after repairs.

  • You may use what’s called “formula 17c” to find the diminished value of your vehicle.

  • Since it takes time and effort to file a diminished value claim, it’s your responsibility to determine whether it’s worth it.

What is a diminished value claim?

What’s a diminished value claim?

Diminished value claims allow policyholders to recuperate some cash after a car accident–it makes up for the difference in value before and after an accident.

If you file a diminished value claim, you may be able to recoup the difference between your vehicle’s value before and after an auto accident. Let’s say you’re involved in a car accident that another driver caused. You then file a liability claim against their auto insurance company so you can pay for repairs.

In the event you believe the accident also reduced the market value of your car, you’d file a diminished value claim, too. This is particularly true if you have plans to sell your car at some point. A diminished value claim allows you to recover the costs to restore your vehicle to its pre-accident market value.

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Types of Diminished Value Claims

The three major types of diminished value claims are as follows:

Immediate Diminished Value

Immediate diminished value refers to the difference in resale value immediately after your vehicle is involved in an accident and before it’s repaired. Since there’s a good chance your car insurance company will cover most of the repairs right after the accident, immediate diminished value claims are rare.

Inherent Diminished Value

An inherent diminished value claim is the most common and the most frequently approved diminished value claim. It occurs when a car loses value because of its damage history, which anyone can find on its CARFAX vehicle history report. In an inherent diminished value claim, the car insurance company assumes that the repairs used top-quality parts. It states that even if the vehicle is “as good as new” after repairs, potential buyers won’t value it as much.

A repair-related diminished value claim applies if your car repair shop uses poor-quality parts after an accident, such as a paint color that doesn’t match your car exactly or aftermarket parts instead of original equipment manufacturer (OEM) parts. In this case, the vehicle can’t be restored to its original condition and therefore warrants a repair-related diminished value claim.

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When to File a Diminished Value Claim

After an accident, you may wonder whether you should file a diminished value claim. Here are a few factors to consider.

  • Your car’s pre-accident value: Older vehicles with lots of damage or mileage are worth less than newer cars with limited to no accident history. If you have an older car, a diminished value claim might not make sense because it’s unlikely that you’ll be compensated substantially.

  • The at-fault party: If you’re at fault for the incident that damaged your car, your insurance company probably won’t approve a diminished value claim. It’s usually only an option if another party is deemed responsible.

  • The other party’s insurance: Ideally, the other party has car insurance. If they don’t, find out if you have uninsured motorist coverage. You can file a diminished claim with your own car insurance company if you do.

  • The laws in your state: Diminished value laws vary from state to state. Do some research on your state’s government site to learn more about the laws that apply to you. You can also consult a lawyer.

See More: Cheap Car Insurance

How to File a Diminished Value Claim

If you decide a diminished value claim is worth pursuing, reach out to the at-fault driver’s insurance company and find out how they typically handle diminished value claims. They will likely guide you through the process of filing a claim. If the liable driver was uninsured, you’ll file a claim through your auto insurance company, as long as you have uninsured motorist coverage.

Once you know which insurance company to file the claim with, gather the appropriate documents. These may include a copy of the police report, photos from the accident scene, and an invoice from the auto repair shop. Then, determine your car’s diminished value. You can hire a licensed appraiser or use the formula below.

Lastly, follow the auto insurance company’s process for filing a claim, and respond to their questions quickly. Since diminished value claims often take weeks or months, be patient, and keep in touch with the claims handler.

How Diminished Value Claims Are Calculated

Typically, car insurance companies won’t share the formula they use to calculate diminished value. Most of them, however, go with the 17c Diminished Value Formula, which originated in Georgia after a claim with State Farm. Here are the steps you’ll need to take to calculate diminished value under 17c:

  1. Calculate the value of your car: You can use a third-party website like Kelley Blue Book, Edmunds, or NADA to find out the market value of your vehicle once the repairs have been made. All you have to do is plug in your car’s make, model, mileage, and year, as well as the extent of the damage.

  2. Apply a cap to that value: Then, apply a 10% cap to your vehicle’s market value. Also known as the base loss of value, this cap is the maximum amount the car insurance provider will pay on the claim.

  3. Apply a damage multiplier: Since the insurance company will reduce your payout based on the extent of damage to your vehicle, you’ll need to apply what’s known as a damage multiplier. Use the table below to determine which damage multiplier to use.

MultiplierDamage level
1.00Severe structural damage
0.75Major damage to structure and panels
0.50Moderate damage to structure and panels
0.25Minor damage to structure and panels
0.00No structural damage or replaced panels
  • Finally, apply a mileage multiplier: While third-party sites use your mileage when they estimate your vehicle’s value, the auto insurance company will make its own adjustments based on mileage. Find your car’s mileage on its odometer, and use that to find the corresponding multiplier in the chart below. Once you do, multiply your value from step 3 by the multiplier, and you’ll have the diminished value of your vehicle.

MultiplierMileage
1.000–19,999 miles
0.8020,000–39,999 miles
0.6040,000–59,999 miles
0.4060,000–79,999 miles
0.2080,000–99,999 miles

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Decide Whether a Diminished Value Claim Is Worthwhile

It’s tedious and time-consuming to file a diminished value claim. That’s why it’s important to make sure it’s worth it. If you find that your car is valued much less after an accident, even after it’s been restored to its original condition, filing a claim for its diminished value might be a good idea.

By going through the process, you may be able to get compensation for your financial loss. A car insurance comparison tool can help you find the best coverage for your unique situation. Within minutes, you can receive personalized auto insurance quotes.

Frequently Asked Questions

  • If you’re liable for an accident, it’s unlikely that a car insurance company will cover your diminished value claim. However, if another driver is at fault, you can file a diminished value claim against their auto insurance policy.

    Before you file a diminished value claim, make sure you know your state laws. You can find this information on a government website or through your state insurance commissioner’s office.

  • Compared to standard car insurance claims, diminished value claims take longer to finalize. Since they’re quite complex, don’t be surprised if your claim takes weeks or even months. Depending on your case, you might need to seek legal advice from an attorney and extend the process further.

  • Every state has its own laws related to diminished value. You can contact a lawyer or the department of insurance in your state to learn about the laws where you live. Most states allow drivers to file diminished value claims against the at-fault party.

  • If you’re not a fan of math but want to calculate the diminished value of the car, visit a site like Kelley Blue Book, Edmunds, or NADA to determine your vehicle’s pre-market value. Then, contact a car dealership to find out its trade-in value.

    When you do so, ask the dealer to provide a write-up so that you know how they considered your car’s accident history when calculating its trade-in value. The difference between your car’s pre-accident value and its potential post-accident trade-in value can give you a good estimate of its diminished value. With this information, you can determine whether a claim is worth it.

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Anna Baluch
Written by
Anna Baluch
Linkedin

Insurance Writer

Anna Baluch is a Cleveland-based personal finance and insurance expert. With an MBA from Roosevelt University, she enjoys writing educational content that helps people make smart financial decisions. Her work can be seen across the internet on many publications, including Freedom Debt Relief, Credit Karma, RateGenius, and the Balance. Connect with Anna on LinkedIn.

Learn More
John Leach
Edited by
John Leach

Insurance Content Editor at Insurify

Photo of an Insurify author
Edited by
John Leach
Insurance Content Editor at Insurify
John Leach is an insurance content editor who has worked in print and online. He has years of experience in car and home insurance and strives to make these topics easy to understand for everyone. He has a linguistics degree from UC Santa Barbara.