If an insured driver hits my vehicle, does he have to pay for the repairs and the diminished value of my car?

If the other driver was at fault for the accident, then his insurance company should pay for repairing your car, up to his policy's liability limit.

The question of whether the insurer will pay for diminished value is a tougher one to answer. Diminished value, also known as diminution of value, is the loss of market value after a car has been in an accident and repaired. Even if the vehicle has been expertly refurbished, a late-model car that has been in an accident may fetch a lower price in the market than a comparable car with a clean accident history.

In many cases policyholders have little recourse in getting their own insurance companies to pay for diminished value, despite fervent objections from consumer advocates. The outcome depends on the insurer, the policy and the state in which the policyholder lives. Regulators in 45 states, Washington, D.C. and Puerto Rico have approved policy language that lets insurance companies exclude coverage for diminished value. The exclusion has not been approved in Maryland, Georgia, Kansas, Hawaii or North Carolina.

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In a third-party claim--when someone else's insurance company is paying the tab--reimbursement for diminished value may be payable on a case-by-case basis. Regulations for how reimbursements are administered for diminished value on third-party claims vary among states. So, your first step is to check with your state's insurance department to see what your rights are in this situation. Keep in mind you might need to submit proof of market value loss to the insurer.

For more, see Diminished value car insurance claims get the wrecking ball.