When you file a car insurance claim, the payout is often less than what you expect. This is because insurance companies factor in depreciation, which is the loss in value your vehicle experiences over time. From the moment you drive a new car off the lot, it begins to lose value. That drop directly affects how much your insurance company will pay in the event of a claim.
This leads many drivers to ask: How can I get depreciation back from car insurance? The answer depends on the type of coverage you carry, the state you live in, and the circumstances of your claim. In some cases, you may be able to recover depreciation through new car replacement coverage, gap insurance, diminished value claims, or negotiations with your insurer.
In this detailed guide, we’ll break down how depreciation works in car insurance, the steps you can take to recover it, the policies that help protect you, and strategies for minimizing depreciation loss. By the end, you’ll understand exactly how to approach your insurer and maximize the value of your claim.
What Is Depreciation in Car Insurance?
Depreciation is the reduction in your car’s value due to age, wear and tear, mileage, and market conditions. Insurers calculate your settlement based on Actual Cash Value (ACV) — which means they pay what your car is worth at the time of the claim, not what you originally paid.
For example:
- You buy a new car for $30,000.
- After 3 years, it’s worth $20,000.
- If the car is totaled, your insurer will likely pay $20,000 minus your deductible.
That $10,000 gap is depreciation. Unless your policy has specific protections, you won’t automatically get that money back.
How Insurers Apply Depreciation
Insurers determine depreciation using several factors:
- Age of the vehicle
- Mileage driven
- Make and model resale value
- Condition of the car before the accident
- Regional used-car market values
When it comes to repairs, insurers may also apply parts depreciation. For example, if you need a bumper replaced, and your original bumper was 7 years old, they might reduce the payout because the part had already lost value.
Why Depreciation Matters in Insurance Claims
Depreciation affects both total loss claims and repair claims:
- Total Loss Claims: If your car is deemed a total loss after an accident, your payout will be based on ACV, which factors in depreciation.
- Repair Claims: Even if your car is repaired, insurers may pay for repairs based on depreciated parts, lowering the reimbursement.
Resale Value: After an accident, even if repaired, your car may be worth less on the market. This is where a diminished value claim comes in.
Ways to Get Depreciation Back from Car Insurance
1. New Car Replacement Coverage
Some insurers offer new car replacement coverage. If your new car is totaled within 1–2 years (and often under a mileage limit), they’ll replace it with a brand-new version of the same model instead of paying the depreciated value.
Example:
- You buy a new Honda Civic for $28,000.
- After one year, it’s worth $23,000.
- If totaled, without replacement coverage you’d get $23,000. With replacement coverage, you’d get a brand-new Civic.
This is one of the best ways to recover depreciation but is usually only available for new cars.
2. Gap Insurance
If you finance or lease a car, you may owe more than it’s worth after depreciation. Gap insurance covers the difference between the ACV payout and the loan/lease balance.
Example:
- Loan balance: $25,000
- Car’s ACV: $20,000
- Standard insurance pays $20,000.
- Gap coverage pays the extra $5,000.
While this doesn’t technically refund depreciation, it protects you from paying it out-of-pocket.
3. Diminished Value Claims
A diminished value claim lets you recover the difference between your car’s value before an accident and its value after repairs.
For instance:
- Pre-accident value: $18,000
- Post-repair value: $15,000
- Diminished value: $3,000
If the accident was caused by another driver, you may be able to file this claim with their insurer. Many states allow diminished value claims, but rules vary.
4. Negotiating with the Adjuster
Even if you don’t have special coverage, you can sometimes negotiate depreciation. Provide:
- Maintenance records proving excellent condition.
- Low mileage compared to typical cars of the same age.
- Recent upgrades (new tires, tech installs).
This evidence may convince the adjuster to reduce depreciation deductions.
5. State-Specific Options
Some states have regulations that allow drivers to challenge insurers over unfair depreciation deductions. For example:
- In Georgia, drivers can file diminished value claims even against their own insurer.
- In North Carolina, state law limits how insurers apply depreciation to certain parts.
Checking with your state’s Department of Insurance can clarify your options.
Typical Depreciation Rates by Vehicle Age
| Vehicle Age | Average Depreciation | Value Lost on $30,000 Car |
| 1 year | 20% | $6,000 |
| 2 years | 30% | $9,000 |
| 3 years | 40% | $12,000 |
| 5 years | 60% | $18,000 |
| 10 years | 80% | $24,000 |
As you can see, depreciation is steepest in the first few years. That’s why policies like gap insurance and new car replacement are most valuable early in ownership.
Steps to File a Depreciation Claim
- Review your policy – Confirm whether you have replacement, gap, or other relevant coverage.
- Document your car’s condition – Keep photos, service records, and receipts for upgrades.
- Get a professional appraisal – Independent reports can show higher values than insurer estimates.
- File a diminished value claim (if eligible) – Submit with the at-fault driver’s insurer.
- Negotiate with the adjuster – Provide evidence of value and push back on unfair deductions.
- Consider legal or appraisal help – If negotiations fail, an attorney or appraiser can assist.
Real-World Scenarios
Scenario 1: Total Loss Without Extra Coverage
- Purchase price: $30,000
- ACV after accident: $20,000
- Insurance payout: $20,000 – deductible
- Depreciation loss: $10,000 (unrecoverable without coverage)
Scenario 2: With Gap Insurance
- Loan balance: $25,000
- ACV payout: $20,000
- Gap insurance covers $5,000
- You walk away without debt.
Scenario 3: With New Car Replacement
- Car bought for $28,000
- After 1 year, ACV: $23,000
- Replacement coverage pays full $28,000 to replace car.
Scenario 4: Diminished Value Claim
- Pre-accident value: $18,000
- Post-repair resale: $15,000
- Diminished value claim: $3,000 recovered.
Pros and Cons of Depreciation Recovery Options
New Car Replacement
- ✅ Full replacement for new cars.
- ❌ Limited to 1–2 years of ownership.
Gap Insurance
- ✅ Covers loan/lease balance.
- ❌ Doesn’t refund lost value if car is owned outright.
Diminished Value Claim
- ✅ Helps recover resale value.
- ❌ Not available in all states; only if another driver is at fault.
Negotiation/Appraisal
- ✅ Can improve payout even without special coverage.
- ❌ Depends heavily on insurer cooperation.
How to Protect Yourself Against Depreciation Losses
- Buy gap insurance when financing or leasing.
- Add new car replacement coverage if your vehicle qualifies.
- Keep detailed maintenance records and receipts.
- Check your car’s market value regularly with tools like Kelley Blue Book.
- Choose cars with strong resale values — models like the Toyota Corolla and Honda Civic tend to depreciate slower.
For drivers of popular models like the Honda Civic or Toyota Camry, which depreciate quickly in early years, these protections are especially useful.
FAQs
Yes, but only if you have new car replacement coverage or if gap insurance applies to a financed vehicle.
Possibly. If another driver is at fault, you can file a diminished value claim for the difference between pre-accident and post-repair value.
No. Some states limit or restrict them. Always check your state insurance laws.
No. Full coverage pays ACV, which deducts depreciation.
Yes, if you lease or finance your car. It prevents you from owing money after a total loss.
Conclusion
Depreciation is one of the most frustrating parts of filing a car insurance claim. While you cannot always get depreciation back, options like gap insurance, new car replacement coverage, and diminished value claims can help recover lost value in the right situations.
If you finance or lease, gap insurance is essential. If you buy new, replacement coverage protects you from steep first-year depreciation. And if another driver damages your car, a diminished value claim may put cash back in your pocket.
The key is to prepare before an accident by choosing the right coverage and keeping thorough documentation. When a claim happens, negotiation and persistence can also improve your payout.
By comparing policies and providers with Alias Insurance, drivers can secure better protection against depreciation while still finding affordable premiums.
