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Diminished Value Claim

Diminished Value Claim

Most auto insurance companies tell clients they are not responsible for paying for diminished value claims, but how successful you can be in making a claim is greatly influenced by the state in which you live.

How a Diminished Value Claim is Figured

Unfortunately, accident damage to your vehicle can affect both its safety and reliability. Due to this damage, the value of your car diminishes. The difference between pre-crash and post-crash worth is called diminished value and can be as high as 18 percent.

Diminished value is usually determined via a matrix that multiplies a percentage of the following:

  • Vehicle's value
  • A mileage factor
  • Damage factor

In most states, the damage factor is established by figuring in the actual structural damage to the vehicle including the quantity of bolted-on body parts which need to be replaced. There is no exact "how to" for determining diminished value and it is not the same in all states. In Georgia the dollar amount of damage is usually not a factor.

In an effort to follow guidelines, many insurance companies select the original State Farm class action formula as the basis for determining diminished value claims. Unfortunately, because the formula is not applied uniformly from one company to another, it is open to broad interpretation.


With the advent of services like CARFAX and other programs that allow people to track a vehicle's history, the diminished vehicle value stays with a car even after it has changed owners. People buying used cars request a vehicle history report to learn of potential problems. The database is nationwide and offers a detailed report in seconds.

The availability of this technology makes the diminished value of your vehicle more real. Because of this, it's important to know how much value your vehicle really lost in order to make an adequate diminished value claim.

Assessing the Damage

Sometimes after an accident, the owner of the vehicle estimates the damages and thinks it better to total the car, but the insurance company doesn't agree. Remember, it is up to the insurance company to decide whether they will pay the insured the actual cash value of the vehicle or the reasonable cost of repair and diminished value if it applies. If you go to your insurance company and request a diminished value, they will assess your damaged vehicle.

If you find yourself in a disagreement over the assessment amount, you can always hire a professional appraiser. Be aware that getting an appraisal from a car dealership is not impartial. If you don't know where to get an appraisal there are a number of online companies that offer this service. Here are a few:

Not All Insurance Companies Pay Diminished Value

If your car has been totaled in an accident, negotiate with your insurance company to get the fair market value. This amount should equal what your car was worth before the accident.

Collecting on a diminished value claim when your car has been repaired is another story. Many states do not require insurance companies to pay the difference between the pre-crash value and the diminished value. Courts in Texas, Maine, South Carolina and Delaware have ruled against the idea of diminished value. In these cases, it really isn't fair because even though the car is repaired, in actuality owners still suffer a loss for which they are not compensated. That loss is the difference between the vehicle's value before and after the accident. The loss is a partial loss, but a loss none-the-less.

If you own a repaired vehicle you have a few options. You can keep the car as is, or try to sell or trade it. When choosing to sell or trade you'll have to decide what you'll do. You can:

  • Accept the lower price
  • Fight the insurers with a diminished value claim

As unfair as that may seem, you must remember that you have a contract between you and your insurance company. If you meet their criteria, the only coverage an insurance company must offer you is whatever meets the minimum liability requirements of the state in which you live.

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Diminished Value Claim