What is Diminished Value?
Diminished value is the reduction in a vehicle’s resale value after it has been involved in an accident and subsequently repaired. Even if the vehicle is restored to its original condition, its damage history decreases its appeal to potential buyers, resulting in a lower market value than a similar, undamaged vehicle.
In the context of car insurance, diminished value can impact claim settlements. After an accident, the vehicle’s owner may seek compensation for the difference between the car’s pre-accident and post-repair value. Insurance companies may be liable to cover this loss, depending on the policy terms and local regulations. Diminished value claims are common in cases where the vehicle was significantly damaged and then repaired.
For example, if a car was worth $20,000 before an accident and is only worth $18,000 after repairs, the owner may file a claim for the $2,000 loss due to diminished value. Understanding this concept is essential for vehicle owners to ensure they receive fair compensation for their losses in value.