What is a Diminished Value Claim?

The information age has brought about an interesting quandary in the area of selling used vehicles previously damaged in an accident. Things like Carfax are now making it possible to track a vehicle’s repair history, making it easier for potential new owners to know what’s under the hood and body before they make a purchase. While this may be good from the standpoint of consumer protection, it’s bad in terms of the resale value of used vehicles.

To understand this principle, just ask yourself a question. If you we’re looking at a 2006 minivan that had sustained front-end damage in a crash, would you be more likely to forgo that vehicle in favor of another one of similar make and model for a similar price? If you’re like most of us you certainly would. The perception of diminished value goes hand-in-hand with cars that have been damaged and accidents — even when the vehicle is repaired to serviceable condition.

In the insurance world the principle of diminished value is a sticky one. Insurance companies obviously don’t want to pay out more in claims than they need to; at the same time they know offering the cheapest car insurance available is not necessarily going to be enough to keep customers happy after accident claims. There needs to be a balancing of profit and customer satisfaction. Diminished value makes achieving that balance a bit more difficult.

Pursuing a Diminished Value Claim

Unless you’re car insurance policy specifically prohibits diminished value claims you do have the right to pursue one with your insurance company. That doesn’t mean they have to honor your claim, but at least you have a shot at it. Depending on how large the difference is between the value of your repaired car and the Blue Book value of your make and model in general, it might even be worth it to hire an attorney. But the difference would have to be at least several thousand dollars to make it worth your while.

To give an example, let’s say an accident caused $5,000 damage to your three-year-old Dodge Durango. Because the Blue Book value of the car is still well over $10,000 your insurance company chooses to repair your vehicle. But then suppose the service writer at your repair garage informs you the truck will lose about $3,000 worth of value simply because it was involved in a crash. If your car insurance company only pays the $5,000 repair bill you have essentially taken a loss because the value of your Durango is now less.

This is a case where you might consider a diminished value claim to recover that $3,000. Whether or not you’re successful depends on your circumstances; circumstances that include the type of policy you have, the insurance company you purchased it from, and how well you can make your case. Rest assured that if you purchased a cheap car insurance policy from a discount broker you’re going to have more trouble with a diminished value claim than you would with a more reputable company.

History on Your Side

No matter how little you paid for affordable car insurance, you do have history on your side when it comes to diminished value claims. Owners of classic cars have been successfully filing such claims for decades. If you study up on the subject, read some articles from industry lawyers, and maybe pick the brains of others who have filed such claims, you can be successful in recovering diminished value in some cases. You can also file a complaint with your state insurance department or seek the services of a certified mediator.

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