Depending on age and condition, a car in a significant accident generally has less resale value than the exact vehicle in pre-crash condition. Even if the car repairs meet the highest quality standards, potential buyers are unwilling to pay as much for a car they know has been previously damaged.

This difference between the value of the pre-accident car and the market value of the post-repair vehicle is known as diminished value.

Note that diminished value does not apply to all damaged and repaired cars. Older model cars may be worth more after an accident because new parts have been substituted for many old parts.

Will my insurance company pay for diminished value?
A diminished value loss may or may not be covered, depending on several factors, including who was to blame for the accident, the coverage provided by your policy, and state regulations.

If the accident is your fault
Except in a few states, the language in the collision section of the standard auto insurance policy excludes coverage for diminished value when the policyholder is at fault in a crash.
That means that if your car policy includes optional collision coverage and you ram your car into a lamppost, your insurer will pay for repairs to the vehicle minus the deductible. However, in most cases, the company would not compensate you for diminished value.

If another driver caused the accident
In all states except Michigan, if an accident is the fault of another driver, you would receive compensation for diminished value. This is because the third party is legally obligated to make the accident victim whole again; in this case, to restore the vicvictim’sr to its pre-accident fair market value.

In other words, the at-fault driver’s insurer is responsible for repairing your car and for paying you the difference between the car’s sale value before the accident and after the repair. This cost is usually covered by the liability portion of his or her insurance policy.

If the at-fault driver is uninsured and cannot pay for repairs, receipt of payment will depend on whether you have purchased an uninsured motmotorist’sverage. About half of the states allow recovery for diminished value under this coverage.

Proof of diminished value
To recover the amount by which the car’s value has been diminished (whether under the at-fault driver’s policy or the policy holder’s uninsured motorist or collision coverage), it is the responsibility to prove the repaired vehicle is worth less than before the accident. Payments may be reduced by the degree to which the policyholder was to blame for the accident.