When the value of your car decreases due to a collision, you may be able to recoup those losses by filing a diminished value claim. Let's explore eligibility and how to calculate diminished value claims.
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If your car is damaged in a collision, its resale value will decrease — even if it’s fully repaired. This is called diminished value.
If you're concerned about taking a hit on your vehicle's resale value, consider requesting compensation via a diminished value claim.
Diminished value, or diminution of value, refers to the difference in the market price of a vehicle before and after an accident. Even if your car is repaired to full function, its involvement in a collision means its value is lower than that of a similar vehicle not involved in a crash.
Diminished value is not to be confused with depreciation, which is the drop in market value as the vehicle ages further from its manufacture date. Depreciation still applies in resale values, but unlike diminished value, there is little you can do to avoid this drop in price.
When it comes time to sell your vehicle, you’ll notice that the resale value is lower than similar vehicles on the market if it has been in a crash. In some cases, you may be able to file a claim with your insurance company to recoup these losses. This is called a diminished value insurance claim. You would file this claim with the insurance company of the at-fault party; it is largely prohibited to file such a claim against your own provider. Each insurance company and state will have its own policies regarding diminished value claims, so it’s important to ensure that the provider offers compensation for diminution in value before proceeding. Even if the provider does not offer payouts for diminished value claims, you may still be able to file with your state.
If you find out the insurance company does offer diminished value claim payouts, it is still a good idea to try to calculate the exact amount of lost value and compare it to the amount the insurance company is willing to pay. Most insurance companies will use the 17c form to calculate diminished value. The formula is as follows:
Use a source like Kelley Blue Book to determine your car’s value by make, model and year. This will be our base number, representing what your car’s resale value would be if it had never experienced an accident.
Insurance companies often apply a cap known as the "base loss of value." This is the maximum your carrier will pay for a diminished value claim.
The 10% cap value is multiplied by a number ranging from 0.00 to 1.00. That number represents the extent of the damage to your vehicle.
See below the diminished value scale:
|Level of damage|
|0.00||No structural damage|
|0.25||Minor damage to structure and panels|
|0.50||Moderate damage to structure and panels|
|0.75||Major damage to structure and panels|
|1.00||Severe structural damage|
Miles driven on your car is also taken into consideration by insurance companies when calculating these claims. Multiplier levels are in increments of .20.
Mileage is assessed as follows:
|1.00||0 - 19,999|
|0.80||20,000 - 39,999|
|0.60||40,000 - 59,999|
|0.40||60,000 - 79,999|
|0.20||80,000 - 99,999|
Let’s say the market value of your car according to Kelley Blue Book is $12,000. First, take 12,000 and multiply it by 10% to account for the 10% cap. 12,000 x .10 = 1,200. The new number we’re working with is $1,200. This is the maximum amount your insurer would pay out for a diminished value claim.
To determine the new resale value of the car, ask your dealership what your vehicle’s trade-in value is now, post-accident. The difference between the Kelley Blue Book value and the trade-in value should also give you a ballpark idea of the diminished value.
Is the number you calculated in formula 17c (or the difference in trade-in and market value) equal or less than what the insurance company is willing to pay out? If so, you may wish to proceed with the diminished value claim.
These claims are often a bit trickier to navigate than others because the burden of proving the diminished value is largely on the customer. There are a few things to know before beginning the claims process:
Always file a diminished value claim with the at-fault party's insurer. If they were uninsured or the company does not offer assistance, speak with your own provider about next steps. You may be entitled to file a claim with the state if you live in one of the states listed above. Contact your state’s department of insurance to proceed.
Filing your claim as soon as possible is your best chance at recouping diminished value losses.
Using a third-party adjuster might also be a good tactic in receiving an accurate and certified numerical value to present to the carrier.
Be aware that because diminished value claims are more complex to file and harder to collect from, you may consider legal counsel, or you may need to prepare for small claims court proceedings.
Ultimately, that is up to each driver to determine. Each situation is unique, and since the diminished value calculation is dependent on so many factors, only once you gather the proper information may you determine a claim’s worth. With variances in insurance carrier policies, state regulations, level of damage and age of your vehicle, each driver’s situation is distinct. If you decide that you do want to proceed with filing your claim, the information here should serve as ample preparation for your diminished value claim.
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