What does Diminished Value mean in a car accident case?

Diminished value is the difference between the value of your vehicle before it is involved in a car accident and its value following a car accident.  In other words, even though you may have your vehicle completely repaired after it has sustained damages due to an accident, the vehicle will now have a history of having been damaged in an accident, which results in at least some degree of diminished value.  Some studies estimate that diminished value can result in a vehicle losing as much as 18% of its pre-accident value. 

State law determines whether an insurance company is responsible for providing the owner of a vehicle involved in an accident with compensation for diminished value. Most states do not mandate that an insurer compensate a vehicle owner for diminished value, by allowing the insurer to specifically exempt such coverage in its insurance policies.  However, a few states do require that a vehicle owner receive such compensation.  Therefore, an owner’s compensation options  in terms of diminished car value, is very likely to be limited or even made completely unavailable by state law.  In this case, a vehicle owner has little recourse in terms of recouping the diminished value of the vehicle damaged in the accident.