Car insurance can cover a lot of different things: Damage to your car after an accident, property damage you cause with your car, insurance can even pay to repair damage caused by rodents chewing on your car’s wires.
But after a vehicle has been damaged, it can lose value, even once it’s been fully repaired. Even if a vehicle has been restored to near-perfect condition, just the fact that it was in a car accident and had to be repaired can lower its value if you decide to sell it or trade it in down the road.
That loss — the difference between what your car was worth before the damage and what it’s worth after repairs — is called diminished value, and it may be covered by your car insurance policy. If you successfully claim diminished value, it means you’ll receive a payment to make up for the loss in value, but claiming diminished value isn’t easy, and it’s not the kind of claim you can make after just any type of damage.
When is diminished value covered?
Collision coverage will cover damage to your own vehicle after an accident, regardless of who was at fault. That means that, whether you caused an accident with another car or backed into a tree, collision insurance will cover the cost of repairs.
But if you were the at-fault driver, your collision insurance most likely will not cover your vehicle’s diminished value. If your car was damaged in an accident caused by another driver, however, you may be able to claim diminished value with the at-fault party’s insurance.
The at-fault driver is legally responsible for the damage they cause to your car, which can include the loss of its overall value — so diminished value may be covered by the other party’s liability insurance when you file a third-party claim.
You also may have more luck filing a diminished value claim with a newer car. If you’re driving an old clunker and it’s damaged in an accident, the value of the car may not actually decrease that much because of its accident history. But if your car is relatively new and has never been in an accident before, then an accident could significantly affect its value, even after it’s been fully repaired.
What if the other driver was uninsured?
If you were in a car accident caused by an uninsured driver, you’ll need uninsured motorist/underinsured motorist coverage (UM/UIM) to cover the damage. Depending on where you live, you may also be able to make a diminished value claim under your uninsured motorist coverage.
But whether you’re filing a diminished value claim with your own insurer or the other driver’s, in order to receive compensation for diminished value, there are certain steps you’ll need to take to prove that your vehicle has lost value.
How to file a diminished value claim
One of the first things you should do when you’re preparing to make a diminished value claim is figure out how much value your car has lost. It’s your responsibility to prove to the insurer that your car has lost value as a result of the accident. Look up the pre-accident value of your car using a resource like the Kelley Blue Book. Then have it professionally appraised to see what the difference in value is.
If the pre-accident value of a vehicle with the same specs as yours was $20,000, and the professional diminished value appraisal finds that it is now worth $17,500, that means you should seek $2,500 to recoup the lost value.
But car insurance providers use their own formula to calculate diminished value after an accident, so the payment they offer may be lower than what you believe to be the diminished value of your vehicle. You can try to negotiate a larger payment, but you may not get the full amount you’re seeking.
Learn more about how to file a car insurance claim.