How to file a diminished value claim after an accident
Whether you’re in an accident or a tree falls on your car, you may need to make a repair-related insurance claim at some point. Even after your vehicle is fixed, though, you may be surprised to learn that it’s probably not worth as much as it was before.
Read on to learn about diminished value, how it affects your vehicle’s resale value, and what you can do to recoup this loss if you’re not at fault in an accident.
Understanding diminished value
Diminished value is the difference in how much your car is worth prior to an accident vs. its worth after repairs are completed.
While this is something you might not think about prior to a car accident, diminished value makes sense from a market perspective. After all, if you’re a potential buyer comparing two identical cars that are for sale for the same price, but one vehicle was repaired following a serious accident and the other has never been in a crash, which would you pick?
The never-been-wrecked vehicle, after all, is closer to new and less likely to have residual issues from a crash. It may even seem safer.
If you’re involved in an accident but aren’t the at-fault driver, it can feel unfair that your vehicle is now worth less. Thankfully, you can often work with the insurance company to determine a fair depreciation amount and even receive a settlement for this lost value.
There are two primary types of diminished value to understand: inherent and repair-based.
Inherent diminished value is the drop in the perceived value of a vehicle simply because of its involvement in an accident, compared to a non-wrecked version of the same car. Accidents are reported on your vehicle’s history, so they’re almost guaranteed to lower the car’s market value.
The other common type is repair-based diminished value. This occurs when your vehicle cannot be perfectly repaired and restored to its original condition following an accident. This may be due to available parts or even the repair shop’s choice to use after-market parts to repair the vehicle. Even without a change in functionality, these lower-quality repairs or parts will depress your vehicle’s market value.
There are many different factors that go into calculating your car’s value and, in turn, its diminished value after an accident.
How major repairs will impact your vehicle’s market value depends on its:
Make and model
Age
Mileage
Accident history
Make and model
Age
Mileage
Accident history
If you drive an older car with high mileage that has already depreciated quite a bit, an accident won’t drop the value as much as it would a brand new vehicle with low miles. (In fact, in some cases, an older vehicle might actually gain value due to the new replacement parts.)
Filing a diminished value claim
Dealing with your car’s diminished value won’t be the first step in your claims process. First, you’ll need to work with the at-fault insurance company to get your vehicle repaired after the accident. This involves filing a claim promptly, complying with all requests from the insurance company’s adjuster and meeting any deadlines for documentation and information.
After repairs are completed, the at-fault driver’s insurance company will work with you to come to an agreed settlement for the vehicle’s diminished value. In most cases, this will cap out at 10% of the vehicle’s current market value, based on valuation from platforms like Kelley Blue Book and NADA.
It’s also important to note that most providers exclude diminished value reimbursement for at-fault parties. So if you were responsible for a wreck, you are unlikely to get a diminished value settlement even though your vehicle may be worth less after repairs.
Calculating diminished value
As mentioned, the maximum amount of a diminished value settlement is usually 10% of the vehicle’s post-repair fair market value. To determine how much of that 10% you’ll actually be offered, though, carriers often use a multiplier scale.
This damage multiplier takes into account the severity of your vehicle’s damages; for example, repairs for severe structural damage have a multiplier of 1.00, meaning that you could get up to the full 10% of your car’s value. Major damage carries a 0.75 multiplier. If you had only minor damage to the structure or panels, however, your multiplier could be just 0.25 (capping your reimbursement at 2.5% of the car’s value).
After that, your car insurance company will apply a mileage multiplier. The more miles your vehicle had at the time of the accident, the less value it holds and, more than likely, the less time it will continue to be roadworthy. So, to the number reached above, your carrier will multiply another number between 0.00 and 1.00, depending on whether your car had 0-19,999 miles or more than 100,000.
There are a few other ways that an auto insurance company may calculate your settlement offer, depending on where you live and even the policy you hold. Some of these involve:
Conducting market comparisons between your vehicle post-accident and comparable vehicles with no accident history.
Calculating the Kelley Blue Book or NADA value of your vehicle pre- and post-accident.
Working with a professional appraiser to determine how much value your car has lost since being repaired.
Conducting market comparisons between your vehicle post-accident and comparable vehicles with no accident history.
Calculating the Kelley Blue Book or NADA value of your vehicle pre- and post-accident.
Working with a professional appraiser to determine how much value your car has lost since being repaired.
You, or your carrier, may consult with auto experts to better assess the diminished value. It’s also important to note that guidelines and regulations surrounding diminished value can vary by state.
Working with or without a lawyer
Depending on the complexity of your case, you may choose to hire a lawyer to help navigate negotiations around the diminished value of your vehicle and your settlement. Attorneys are well-versed in negotiating with insurance companies on clients’ behalf to get the best possible settlement. If you’re already working with an attorney for a personal injury or property damage claim, they may be able to also include your diminished value claim.
If you’re not working with an attorney already, it’s important to weigh your options before hiring one just for a diminished value claim. Many car accident attorneys charge a fee on contingency (meaning, if you win) that’s equal to one-third of your recovered damages. Even if they are willing to charge a flat rate for their services, you may not recover enough extra (on top of whatever the carrier is already offering) to warrant the attorney’s fee.
Negotiating a diminished value claim
If you decide to negotiate with an insurance company on your own, being well-prepared is your best offense.
Put together as much documentation and evidence as you can to support your claim. This may include calculations, specific market examples, and any other valuations or appraisals you’re able to gather. Once you have a fair and adequate number in mind, you can submit everything at once to the carrier and wait for their response.
Best case scenario? They agree with your valuation and offer a settlement of the same amount. But that’s unlikely.
Instead, you’ll probably be asked for additional information or to submit to further vehicle inspections. The insurance company may make you a counteroffer that’s lower than your initial request. It’s up to you to come back with another counter, or choose to accept the settlement.
If the diminished value claim is disputed or you cannot come to an agreement on the settlement amount, most states allow you to request mediation or arbitration through a third party. If working with an attorney, you can also opt to take the case to trial.
Wrecking your car can be inconvenient and costly, even if you’re not at fault. Once your car has been repaired, you may still be surprised to learn that you are not “made whole,” as your vehicle is now worth less. Filing a claim for the diminished value of your car is one way to get compensation from an at-fault party’s insurance policy and ensure that you are limiting your losses for an accident you didn’t cause.
