What a Diminished Value Claim Is and Whether State Farm Covers It
A diminished value claim is a request for payment when your car loses resale value after an accident, even after repairs are completed. If you were hit by another driver and State Farm paid to fix the damage, the car may still be worth less on the used market because it now has an accident history. A diminished value claim asks State Farm to compensate you for that loss.
State Farm's coverage of diminished value claims depends on your state and your policy. In some states, State Farm will pay diminished value claims only if the other driver was at fault and their insurance is paying for repairs — this is called a third-party claim. In other states, State Farm does not cover diminished value at all, even when the other driver caused the accident. A few states require insurers to pay diminished value as part of collision coverage, but most do not.
Before you file, check your state's rules. Your State Farm agent can tell you whether diminished value claims are available where you live and whether your specific accident qualifies.
Key Takeaways
- Diminished value claims are only available in certain states, and State Farm's willingness to pay depends on whether the other driver was at fault and which state you live in.
- You will need repair estimates, the accident report, your vehicle's pre-accident value, and comparable vehicle listings to show the post-accident value drop.
- Third-party claims (filed against the other driver's insurance) are more likely to be paid than first-party claims (filed against your own State Farm policy).
- State Farm typically uses the percentage-of-repair method, which calculates diminished value as a percentage of the repair cost, usually between 10 and 25 percent.
States Where State Farm Pays Diminished Value Claims
State Farm pays diminished value claims in a limited number of states. Georgia, South Carolina, and Alabama have laws that require insurers to pay diminished value when the other driver is at fault. In these states, you have a legal right to file the claim, though State Farm may still dispute the amount.
In other states like Florida, Louisiana, and Mississippi, State Farm may pay diminished value claims on a case-by-case basis, but it is not required to do so. The company's decision often depends on the severity of the damage, the repair cost, and the vehicle's age. Newer cars with minor damage are more likely to receive payment than older vehicles or those with extensive repairs.
In most other states, including New York, California, and Texas, State Farm does not pay diminished value claims at all, even when the other driver was clearly at fault. If you live in one of these states, you would need to pursue the claim through the other driver's insurance company instead.
How to File a Diminished Value Claim With State Farm
Start by contacting your State Farm agent or claims adjuster and asking whether diminished value claims are available in your state for your accident. If they are, ask for the claim form and the company's process for handling these requests. Some State Farm offices handle diminished value claims through the regular claims department; others may route you to a specific team.
When you file, you will need to provide documentation showing that the car lost value after the accident. This includes the original repair estimate, the final repair bill, your vehicle's pre-accident market value (from sources like Kelley Blue Book or NADA Guides), and current listings for the same make, model, year, and mileage to show what similar cars are selling for now. The gap between the pre-accident value and the current market value is your claimed loss.
State Farm will assign an adjuster to review your claim. The adjuster may request additional information, inspect the vehicle, or ask for a professional appraisal. Be prepared to explain why you believe the accident caused the value loss — for example, if the car was recently repaired and the repair quality is high, the adjuster may argue that diminished value should be lower or zero.
Documents You Will Need to Gather
Collect these documents before you submit your claim to State Farm:
- The police accident report or incident number
- The original repair estimate from the body shop
- The final repair invoice showing all work completed
- Photographs of the damage before and after repair
- Your vehicle's pre-accident value from Kelley Blue Book, NADA Guides, or similar sources, with the date you checked
- Current market listings for identical or nearly identical vehicles (same make, model, year, mileage, condition) showing what they are selling for now
- Your vehicle's maintenance and accident history records
- Any professional appraisal you obtained
The more specific your documentation, the stronger your claim. Vague estimates or outdated pricing will make it easier for State Farm to deny or reduce your claim.
How State Farm Calculates Diminished Value
State Farm typically uses one of two methods to calculate diminished value: the percentage-of-repair method or the market value method.
Under the percentage-of-repair method, State Farm multiplies your repair cost by a percentage — usually between 10 and 25 percent — to arrive at the diminished value amount. For example, if repairs cost $5,000, State Farm might pay $500 to $1,250 as diminished value. The percentage depends on the severity of the damage and the vehicle's age. Minor damage to a newer car might receive 10 percent; major damage to an older car might receive 25 percent or be denied entirely.
Under the market value method, State Farm compares your vehicle's pre-accident resale value to its current resale value based on actual market listings. If your car was worth $15,000 before the accident and similar cars are now selling for $13,500, the difference is $1,500. This method is more precise but requires more documentation and is less commonly used by State Farm.
What Happens if State Farm Denies Your Claim
If State Farm denies your diminished value claim, you have several options. First, ask the company in writing to explain the denial. Request the specific reason — for example, whether they believe diminished value claims are not available in your state, or whether they believe the damage did not cause a value loss.
If you disagree with the denial, you can file a complaint with your state's Department of Insurance. Most states have a formal complaint process that is free to use. The department will investigate whether State Farm followed state law and company policy. This process typically takes 30 to 60 days.
If the other driver was at fault and their insurance is handling the claim, you can also file the diminished value claim directly with that insurance company instead of State Farm. Third-party claims are often easier to recover because the other driver's insurer has less incentive to deny them.
In states like Georgia where diminished value is legally required, you may also have the right to pursue a small claims court case against State Farm if the claim is small enough. Consult a local attorney to understand your options in your state.
Third-Party Claims vs. First-Party Claims
A third-party claim is filed against the other driver's insurance company. A first-party claim is filed against your own State Farm policy. Third-party diminished value claims are much more likely to be paid because the other driver's insurer has a financial incentive to settle — if they deny the claim, you may pursue it in court, and they could end up paying more.
First-party claims are harder to win because State Farm is paying out of its own pocket and has less incentive to approve the claim. Many states do not require insurers to pay first-party diminished value claims at all, so State Farm can straightforward deny them.
If the other driver was at fault, always file the diminished value claim with their insurance company first. If that company denies it or offers too little, then file with State Farm as a backup. Keep copies of all correspondence with both insurers.
Frequently Asked Questions
Can I file a diminished value claim if I was partially at fault for the accident?
It depends on your state's rules. In states that require diminished value payment, you typically must be zero percent at fault or the other driver must be primarily at fault. If you were partially at fault, State Farm will likely deny the claim or reduce the payout based on your percentage of fault. Check your state's comparative negligence laws.
How long do I have to file a diminished value claim?
Most states have a statute of limitations of two to four years from the date of the accident, but State Farm may have an internal important date that is shorter. File as soon as possible after repairs are complete, while the accident is still recent and documentation is fresh. Waiting months or years makes it harder to prove the value loss was caused by the accident.
Will filing a diminished value claim increase my insurance rates?
No. Diminished value claims do not affect your rates because you are not claiming that you caused the accident — the other driver did. Your rates are based on your driving record and claims history, not on claims filed against the other driver's insurance.
What if my car was worth very little before the accident?
Diminished value claims are harder to win on older or lower-value vehicles because the actual dollar loss is small. State Farm may argue that the car's value did not drop significantly or that the drop was due to age and mileage rather than the accident. If your car was worth $3,000 before the accident, even a 20 percent diminished value claim would only be $600, which may not be worth the time to pursue.
Can I hire an appraiser to prove the diminished value?
Yes. A professional auto appraiser can provide a detailed report showing the pre-accident and post-accident value of your vehicle. This strengthens your claim significantly, though it costs $300 to $600. If State Farm denies your claim and you pursue it further, the appraisal report becomes important evidence. For high-value vehicles, the cost is usually worth it.