What is a Diminished Value Claim?
A car has “diminished value” after a collision because it loses resale value. Even if the car is successfully repaired, it will still have less value than an identical vehicle that has never been in a collision. Obviously, all other things being equal, future buyers will prefer buying an accident-free vehicle.
Not all vehicle owners, however, are eligible for diminished value claims. Laws vary between states.
If you’re eligible to collect diminished value in your state, then you need to submit a claim to your insurance company. If your insurance company refuses to pay, then you may wish to pursue the case in small claims court.
There Are Three Types of Diminished Value Claims
The insurance industry has three types of diminished value claims, including immediate, inherent, and repair-related diminished value claims.
Immediate: Immediate diminished value claims refer to the difference between the resale value of the car before and after an accident. The value of the vehicle “immediately” changes because the car has damage from the accident. Immediate diminished value isn’t typically useful, because it refers to the vehicle before it’s been repaired. It’s unlikely that you’re going to sell a damaged vehicle. You typically repair the vehicle before selling it.
Inherent: Inherent diminished value refers to the difference between the resale value of the car before the accident and the resale value of the car after it’s been repaired. This is the most useful measurement when dealing with diminished value claims.
Repair-Related: Some situations may require a reference to repair-related diminished value, which refers to the loss of value related to incomplete or faulty repair work on the vehicle.
Diminished Value Claim Laws Vary By State
States have different laws regarding diminished value claims. Most states allow diminished value claims. However, laws vary based on first party and third party claims.
First Party Claims: First party claims refer to when you try to cover repair-related diminished value from your own insurance company.
Third Party Claims: Third party claims refer to trying to recover diminished value from the insurance company of the at-fault driver.
Check out this PDF for a good overview of how first and third party claims vary in your state. Each state has different rules. States typically allow you to make a third party claim (against the at-fault party’s insurance company) for diminished value, but may restrict first party claims (against your own insurance company). States that limit first party claims include Alabama, Arizona, Delaware, Florida, Indiana, Maine, Massachusetts, Nebraska, New Mexico, Pennsylvania, South Dakota, Tennessee, Texas, Virginia, and Wisconsin.
Repair your Vehicle
So you’ve had a collision. Your first step is to contact your insurance company and ask where and how to repair your vehicle.
After your vehicle has been repaired, an appraiser from the insurance company will compare the value of your repaired car to its value before the accident.
You cannot file a diminished value claim against a third party until your vehicle has been repaired.
Once you have the “post-repair” value of your vehicle, it’s time to research the pre-accident value. Consult resources like the Kelley Blue Book at KBB.com. Find vehicles of your same make, model, and geographic location. Save this information for your future claim.
If you don’t trust or agree with the appraiser’s post-repair value, then you may want to take your car to a car dealer. Or, hire an independent appraiser. They might provide a more realistic estimation of your vehicle’s value.
Up above, we mentioned “repair-related” diminished value claims. If the repair shop performs a faulty repair, then you may be eligible to file a repair-related diminished value claim. Repair-related diminished value claims fall under “first party” claims. You need to file such a claim against your own insurance company.
As with any collision, check your policy for any information regarding diminished value claims. Your insurance policy should carefully explain everything you need to know regarding diminished value claims. Some insurance companies will forbid diminished value claims on vehicles over a certain age (say, vehicles over 7-8 years).
File your Claim
Before filing your claim, you should have all the resources mentioned above, including:
- The pre-accident value of your vehicle (from KBB.com or other online resale websites)
- The post-accident value of your vehicle (from an appraiser or used car dealer)
Knowledge of your state’s policy regarding diminished value claims, as well as your own insurance policy’s rules on diminished value claims
Once you have this information, contact your insurance company. Explain the pre-accident and post-repair value of your vehicle, then ask for compensation based on the diminished value of your vehicle. Be persistent – insurance companies don’t like paying diminished value claims. Don’t be afraid to hold out for a higher offer. Some vehicle owners even hire an attorney or take their claim to small claims court (although in many cases, high attorney fees will wipe out any money saved from the claim).
If your vehicle has been in an accident, then its resale value has dropped. You may be eligible for compensation in the form of a diminished value claim. Follow the guide above to learn how to make a diminished value claim after any car accident.