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Does Car Insurance Pay for Diminished Value?

The purpose of car insurance is to get you back to where you were before your accident.

If you wreck your car, the insurance company will pay for the damages. If the car is totaled, they will pay you whatever it was worth so you can replace it with a similar vehicle.

Either way, the insurance company's job is to make you whole again.

But there's just one problem: Whenever a car is damaged and repaired, it loses value.

This is called diminished value and the vast majority of insurance providers do not pay for this loss.

Any car with a past history of repair brings up an automatic red flag when you try to sell it. People question whether the repairs were made properly or if there was more extensive damage which can't be seen.

On a $15,000 used car, diminished value can easily knock $2,500 off the price.

Unfortunately, in most states, if you are at fault in an accident and your car suffers diminished value, you will not be reinbursed by the insurance company.

If the accident was caused by another driver, then you have a better chance at recovering diminished value - but it's still very difficult.

States where it's easier to get compensated for diminished value include Georgia, Kansas, Maryland, Hawaii, and North Carolina.

If your car suffers diminished value due to an accident, you can absorb these costs by keeping the vehicle for several years. If you decide to sell it after that, the diminished value won't make a big difference.

3 Steps Every Car Buyer Needs to Take to Save Maximum Money

The key to getting the best deal is to gather price or lease bids from as many local dealers as possible. Then shop that best price around until no one can beat it. Here are the steps:

Step 1 Get Prices From My Trusted Network

Select the vehicle you're interested in to see if there are local dealers in my network who will provide you with their best upfront price. You will get direct access to an internet sales manager who you can further negotiate with online (no need to visit dealership).
Select Vehicle to Get Local Pricing

Step 2 Get Prices From TrueCar / CarsDirect

TrueCar, and CarsDirect are my top 2 online price quote recommendations. These services show you pre-negotiated prices from dealers closest to you - and the deals are usually pretty decent. But remember, you can still negotiate further.

Step 3 Complete my Checklist

Follow this up with my checklist to make sure you squeeze out every last bit of savings.
- Gregg Fidan

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About The Author

Gregg Fidan Gregg Fidan is the founder of RealCarTips. After being ripped off on his first car purchase, he devoted several years to figuring out the best ways to avoid scams and negotiate the best car deals. He has written hundreds of articles on the subject of car buying and taught thousands of car shoppers how to get the best deals.
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