You’ve crashed your car. Now how much is it worth?
No one wants to get into a car accident, regardless of who’s at fault. But accidents happen, even with the safest driving behavior. If you get into an accident and your car is worth less than before the accident, you may have to create a diminished value claim to be “made whole” again — in other words, to get back the difference between what your vehicle was worth pre-accident versus post-accident.
To define what a diminished value claim is, first let’s define diminished value.
The diminished value of a vehicle is the car’s value after it has been damaged in an accident. This amount is often lower than the car’s worth pre-crash, even if it’s been repaired well. To find a car’s diminished value, subtract the worth of the cost post-repair from the worth of the car pre-crash.
While the diminished value is typically lower than the pre-crash value, if you have an older car, it may be worth more post-crash if the repairs were done with new parts. An appraiser can help make this determination.
To put it all together, a diminished value claim is an insurance claim asserting a car has diminished value due to an accident.
Diminished value isn’t one-size-fits-all. There are different types, depending on the situation and the time of the appraisal.
Inherent diminished value is a loss in value due to a vehicle’s involvement in an accident. It is the most common and accepted type of diminished value.
Repair-related diminished value means that the vehicle wasn’t properly repaired after an accident, with structural and/or cosmetic damage. The repairs also may be incomplete at the time of the claim.
Immediate diminished value is the state of the car right after the accident but before it’s been repaired.
To file a diminished value claim, first you’ll need to get your vehicle appraised to find its value post-crash. You can hire a third-party appraiser to evaluate the car and potentially get the biggest reimbursement possible.
There are two types of appraisals.
Total-loss thresholds vary by state. Check your state’s total-loss threshold below.2
|State||Car total-loss threshold|
|Alaska, Arizona, California, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Maine, Massachusetts, Mississippi, Montana, New Jersey, New Mexico, Ohio, Pennsylvania, Rhode Island, South Dakota, Utah, Vermont, Washington||Total-loss formula (Actual market value minus salvage value equals less than the cost of repairs)|
|Arkansas, Indiana, Iowa, Minnesota, Wisconsin||70%|
|Alabama, Kansas, Kentucky, Louisiana, Maryland, Michigan, Nebraska, New Hampshire, New York, North Carolina, North Dakota, South Carolina, Tennessee, Virginia, West Virginia, Wyoming||75%|
|Florida, Missouri, Oregon||80%|
After the appraisal, you file either a first-party claim (if the other party in the accident lacks insurance) or a third-party claim with the other party’s insurance company.
If your diminished value claim is accepted, you’ll be compensated not only for the cost of your car’s repairs but also for its diminution in value.
Wait until your vehicle is fully repaired and appraised to file a diminished value claim.
While auto insurance companies don’t reveal their exact formulas for calculating diminished value claims, we know that they consider these factors about the vehicle:
The appraisal company Autoloss provides a calculator that estimates your car’s diminished value. Check it out at autoloss.com.
Filing an insurance claim correctly could mean the difference between being made whole again or losing money due to your accident.
Only you as the policyholder can file a diminished value claim, either with your own insurance provider or with third-party car insurance.3 However, it makes sense to file only if you were not at fault in the accident.
File your claim after your vehicle has been appraised and repaired. Assuming the other party has insurance, you’ll file a third-party claim and request compensation using the documentation your appraiser provided. From there, they can negotiate to help you get the most compensation. Look for an appraiser, consumer advocate, diminished value company, or your own adjuster.4
If you caused a car accident, your insurance company does not have to pay for your car’s diminished value, only its repairs under collision coverage (minus your collision deductible).
However, if the accident was not your fault, the other party’s insurer must make you whole again through either the other driver’s liability insurance or, if they lack insurance, your policy’s uninsured motorist coverage. That said, you have to prove diminished value, probably by using a third-party appraisal company.5
Each state has different legislation regarding diminished value claims. See your state’s law here: https://www.mwl-law.com/wp-content/uploads/2018/02/DIMINUTION-IN-VALUE-IN-ALL-50-STATES.pdf.
The point of car insurance is to protect you from financial losses following a car accident, so making sure you’re financially whole after a car accident is essential. However, if you don’t hire an appraisal company, your insurance may cover only your car’s repairs and not its diminished value. Sometimes, it’s worth spending a little money with an appraiser upfront to save you more money in the long run.
To learn more about diminished value claims, read our frequently asked questions below. Or, to learn about a related claim, read our article on subrogation claims. If the other party’s insurance provider refuses to pay your diminished value claim, your insurance provider may have to file a subrogation claim if it paid for the diminished value itself.
Yes, diminished value is negotiable. The best way to get the most money out of a diminished value claim is to hire someone to negotiate for you, like an appraiser or consumer advocate.
How much value a car loses after an accident depends on its actual market value pre-accident, the severity of the accident, and the nature of the damage, be it structural, mechanical, or purely cosmetic. That said, according to data from Carfax, the average loss after an accident is $500, though it can be as high as $2,100 for vehicles with severe damage.
If a part of your car’s diminished value was not reimbursed, you can write it off and deduct it from your taxes as a property loss. Use IRS Form 4684 and the Schedule A section of Form 1040. Although you won’t need it for your tax return, keep your documentation, because you may need it if you get audited. The documentation should include the following information:
If your accident could spark legal action, what you do and don’t say can affect the case. According to Shouse Injury Law Group, you should not do the following when communicating with an insurance adjuster:
Instead, ask the insurance adjuster for their contact information, which you should give to your personal injury lawyer. Your lawyer should get in touch with the adjuster directly.
Local New York Diminished Value Expert. AutoLoss. (2023).
Total Loss Threshold By State. Appraisal Engine. (2015, Mar 4).
Consumer Advisory: Automobile Diminished Value Claims. Maryland Insurance Administration. (2022, Dec 14).
Understanding Diminished Value Claims After A Car Accident. CARFAX. (2021, May 21).
What is diminished value? Insurance Information Institute. (2023).