Diminished Value Claims Explained

Last Updated on June 16, 2020

An automobile involved in a collision is almost certain to have a diminished value stemming from dents, structural damage, chipped paint, scratches, reduced functionality, and other damage.  If you are even slightly suspicious an accident reduced the value of your vehicle, you should file a diminished value claim without delay.  Let’s take a look at the details of diminished value claims including how they are filed and how this unique value is calculated.

diminished value claims explained

Diminished Value Claims

An automobile’s value is diminished after a collision as it loses some of its value.  The vehicle is sold for that much less after an accident as it is no longer in new condition and required replacement parts or repair work of another sort.  Though it might be possible to repair the damaged portion of the vehicle in full, the vehicle still has less value following the accident in comparison to the exact same vehicle without an accident history.  The bottom line is automobile-seekers desire vehicles that have not been involved in an accident of any sort.

The Types of Diminished Value Claims

There are different types of diminished value claims: repair-related, immediate and inherent.  Inherent diminished value is a reference to the distinction between the automobile’s resale value prior to the accident and its resale value after repair.  This measurement is quite useful when handling diminished value claims.

Immediate diminished value claims focus on the distinction between the vehicle’s resale value before and after the collision.  The vehicle’s value changes as there is damage stemming from the accident. Most people do not attempt to sell a vehicle damaged in an accident so the immediate diminished value is not that useful.  Repairs take place prior to the attempt to sell so few refer to immediate diminished value. Certain situations require the use of repair-related diminished value.  This type of diminished value claim refers to the loss of value tied to insufficient or flawed automobile repair work.

Calculating Diminished Value

The majority of the insurance providers in the United States determine diminished value with a formula known as 17c.  The formula’s name stems from a famous Georgia court case. Though a diminished value calculator is not applicable in every single situation, most insurance companies rely on the 17c formula or a similar version.  The first step is to determine the vehicle’s value with the National Automobile Dealers Association’s website. Enter your vehicle’s specific details such as the year, make, model, condition, mileage, etc. The next step is to determine the base loss value.  Most insurance providers put a 10 percent cap, referred to as the base loss of value, onto the estimated sales value. Therefore, the diminished value claim will top out at 10 percent of the appraised value.

The third step in calculating diminished value is to apply a damage multiplier.  Insurance providers rely on a damage multiplier to alter the base loss value from above.  The established cap is more than the multiplier by a value between zero and one to reach an adjusted figure that is the diminished value.  Cars without structural damage have a base loss value multiplied at zero while cars with significant structural damage have a multiplier of one.  A multiplier value of 0.75 is applied for vehicles with major damage to the structure and panels. Minor damage to the car’s structure and paneling is accounted for with a multiplier of 0.25.  The middle ground is moderate damage to structure/panels. This “moderate” category is represented with a multiplier of 0.50.

The Final Step: Applying the Mileage Multiplier

The mileage multiplier functions are similar to damage multipliers.  A mileage multiplier decreases the adjusted base loss value that hinges on the number of miles the vehicle has been driven.  In other words, older vehicles have less value than most new ones. The adjusted base loss value determined above is multiplied by the mileage multiplier to reach the diminished value.  As an example, a mileage multiplier of 1.00 is designated for new cars with no mileage through 19,999 miles.

Filing a Diminished Value Claim

As long as you are eligible to file a diminished value claim, you should submit your claim to the insurance provider.  In most cases, the insurance company pays the claim. However, it is possible for the insurer to deny the claim. If you believe the insurance provider should pay your diminished value claim, you can pursue justice in small claims court.

Gather all relevant paperwork prior to filing your diminished value claim.  Retrieve the value of the vehicle in its pre-accident status through KBB.com or a different online resource.  You will also need the vehicle’s value after the accident as determined by a used car dealer or appraiser. Get the details of the state’s unique policy pertaining to diminished value claims.  You will also need your automobile insurance policy so you can take a look at the rules and other “birdseed” related to diminished value claims.

Once you have all of the necessary paperwork in-hand, give the insurance company a call.  Tell the insurance company representative about the vehicle’s value prior to the accident and following the accident.  Request compensation in the range of the vehicle’s diminished value. If the insurance company pushes back, don’t give up!  Expect the representative to attempt to avoid paying the diminished value claim at the amount requested. Play your cards right, hold out for the offer you desire and you will eventually win your claim.

James Shaffer
James Shaffer James Shaffer is a writer for InsurancePanda.com and a well-seasoned auto insurance industry veteran. He has a deep knowledge of insurance rules and regulations and is passionate about helping drivers save money on auto insurance. He is responsible for researching and writing about anything auto insurance-related. He holds a bachelor's degree from Bentley University and his work has been quoted by NBC News, CNN, and The Washington Post.
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