How it works
Example: a car worth $20,000 before a crash is properly repaired, but similar cars with an accident history sell for about $17,500. The $2,500 difference is the diminished value.
Who might pay depends on the type of claim:
- Third-party claim: if another driver clearly caused the crash, their insurer is generally responsible for your repairs and your diminished value. The Insurance Information Institute says this applies in all states except Michigan. You must prove the loss, and a payment can be reduced by your own share of the blame.
- First-party claim: your own collision coverage generally does not pay diminished value, and many policies exclude it outright. Only a very few states require it.
Most states follow that split: no diminished value under your own policy, but a claim is possible against the at-fault driver's liability coverage. State laws and court decisions set the details, so check with your state insurance department before you file.
Related terms
Sources
- Insurance Information Institute, What is diminished value? definition, at-fault driver's insurer, collision exclusion, Michigan exception
- Connecticut Office of Legislative Research, Insurance Claim for Car's Diminished Resale Value policy exclusion wording, first-party versus third-party claims, majority view
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