How to Collect Diminished Value

Three Parts:Learning the BasicsFiling an Insurance ClaimUnderstanding the Value of Your Claim

In an insurance context, “diminished value” refers to a vehicle’s loss of resale value after it is damaged, even if it is successfully repaired. A perfectly repaired car still loses value, because future buyers prefer a new car over the same model that was previously damaged and repaired. Whether or not you are entitled to recover for the diminished value of your vehicle depends on state law, as some states treat this theory of recovery differently than others. To collect diminished value, you will need to submit a claim to the insurance company. If they refuse to pay your claim, you can probably pursue your claim in small claims court.

Part 1
Learning the Basics

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    Learn the vocabulary. There are three types of diminished value discussed in the insurance industry. These are immediate, inherent, and repair-related diminished value.
    • Immediate diminished value is the difference between the resale value of the car immediately prior to the accident and value immediately after the accident, before repairs. This valuation is not particularly useful, because you will almost always want to repair the vehicle at the insurer’s expense before selling it.
    • Inherent diminished value is the difference between the resale value of the car before the accident and after it has been repaired. This is the valuation you will most likely use.
    • Repair-related diminished value is any loss of value resulting from incomplete or faulty repair work.[1]
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    Differentiate between first-party and third-party claims. A first-party claim is when you try to recover repair-related diminished value from your own insurance company. A third-party claim is when you try recover inherent diminished value from the at-fault party’s insurance company.[2]
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    Check your state’s law. Each state has its own laws regarding diminished value claims. You should find out how your state’s courts measure diminished value and how the state treats first-party claims versus third-party claims. You can find a state-by-state overview of the applicable caselaw at
    • First party claims are limited by law in Alabama, Arizona, Delaware, Florida, Indiana, Maine, Massachusetts, Nebraska, New Mexico, Pennsylvania, South Dakota, Tennessee, Texas, Virginia, and Wisconsin.[3]

Part 2
Filing an Insurance Claim

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    Have your vehicle repaired. After you have the car repaired, and appraiser will compare the value of your repaired car to its value before the accident. Therefore, you must have the car repaired before it can be appraised for a third-party inherent diminished value claim. Contact your insurance company for instructions on where and how to have your vehicle repaired.
    • If the repair shop does an unsatisfactory repair job, you can then file a first-party claim for repair-related diminished value with your insurer.
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    Review your insurance policy. If your car was not optimally repaired and you think you may have a first-party claim for repair-related diminished value, review your insurance policy. Your policy is a contract, and should specifically state if and how your insurance policy covers repair-related diminished value claims.[4]
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    Research the vehicle’s pre-accident value. To establish how much value your vehicle lost, you will need to subtract the vehicle’s current value from its value prior to the accident. To figure out its prior value, consult Kelley Blue Book online at Locate the approximate value of a vehicle of the same make, model, mileage, and condition in your geographic area.[5] Save this information to present to the insurance company.
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    Establish the vehicle’s current value. To prove what the vehicle is now worth, after it has been repaired, you can hire a professional appraiser to evaluate the vehicle. Alternatively, you may need to actually sell the vehicle. You can then argue that its ultimate sale price is its post-repair market value.[6]
    • You can also establish diminished value by taking your car to a used car dealer and asking for a written estimate of its trade-in value. Make sure that the estimate explains that the car’s diminution in value is due to the accident it was in.[7]
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    File your claim. Contact the insurance company with the pre-accident and post-repair values of the vehicle and ask for compensation for the diminished value of the vehicle. The insurance company will almost certainly resist paying, so you will need to be persistent. The company may offer nothing, or only a small payment to try to settle your claim quickly. You should hold out for a higher offer.[8] You may need to hire (or threaten to hire) an attorney or to take your claim to small claims court.
    • Remember that first-party claims should be directed at your insurance company, while third-party claims should be directed at the at-fault driver’s insurer.
    • It may not make economic sense to pay an attorney’s fees if your diminished value claim is not particularly large.
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    Take your case to small claims court. If the insurance company will not pay your claim, or will not pay a reasonable amount to compensate you for your loss, you can probably take your case to small claims court. Small claims courts have jurisdictional limits, meaning that there is an upper limit on the amount of money you can request, usually several thousand dollars.[9] To file a small claims case, visit the court clerk’s office and ask what forms you need to submit to initiate a case.
    • Small claims courts use simplified rules so that ordinary citizens can effectively represent themselves without the aid of an attorney. In some states, you may not even be permitted to have an attorney represent you in small claims court at all.
    • Filing a case in small claims costs time, effort, and filing fees. You may be better off accepting the insurance company’s offer than trying to get a bit more compensation in court.

Part 3
Understanding the Value of Your Claim

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    Consider the age of your vehicle. Older cars, unless they are considered classics or collectibles, are generally worth less than newer cars. Keep this in mind as you develop a realistic appreciation of your diminished value claim. Do not let a pushy insurance adjuster convince you that your car is worth less than its true value, but also do overinflate your expectations for your recovery.[10]
    • Some insurance companies state that they do not pay diminished value claims for cars over a certain age (for example, seven years).[11] This age limit is usually arbitrarily decided by the insurer, and is not a bar to your recovery in court. However, if your car is somewhat old, you may end up spending more in legal fees than you can hope to recover on your claim.
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    Check the mileage. As with older versus newer cars, cars with a higher odometer reading are usually worth less than newer, less heavily-used vehicles. Your insurer might arbitrarily state that they do not cover diminished value losses on vehicles over a specific mileage (for example, 100,000 miles). If your vehicle is over the limit imposed by the insurer, you can still try to recover for diminished value, but you should try to estimate how your mileage has affected the value of the car.[12]
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    Consider your surroundings. When judging the market value of your car, take your geographic location into account. If you live in a rural area, your car’s resale value is probably lower than it would be in a major city, because the cost of living is generally higher in high-density areas. Try to find out what other vehicles in your area are selling for to better judge the value of your car.[13] You can search online or in the local newspaper for local auto sale listings.
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    Acknowledge any prior accident history. If your car has been in an accident before, its resale value has already dropped, even if it was repaired.[14] Remember to calculate the pre-accident value of your vehicle with reference to any prior damage, rather than its off-the-lot resale value.


  • This article is intended as legal information and does not provide legal advice. If you need legal advice, contact a licensed attorney.

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