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Impact of Depreciation on Car Insurance

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Depreciation is the factor that affects the value of car with time. As the car ages there is wear and tear of its components so the insurer considers depreciation factor in valuation of not just the components of the car but also in the overall valuation of the car. All the components of car except the glass components are take as liable for depreciation as they have limited life span and wear and tear occurs with time.

In event of you making a claim; the car insurer would pay you the claims only after deducting the depreciation, therefore you would receive compensation lower than the market value of car. The older the car, greater is the depreciation. You might feel that there is issue with car insurance policy but it is not so.

Age of the Vehicle	Depreciation % applied
Less than 6 months	0%
More than 6 months but less than 1 year	5%
More than 1 year but less than 2 year	10%
More than 2 year but less than 3 year	15%
More than 3 years but less than 4 year	25%
More than 4 years but less than 5 years	35%
More than 5 years but less than 10years	40%
More than 10 years	50%

Car Depreciation Rate for Various Parts

Component	epreciation % applied
For all paint work	50%
Rubber/Nylon/Plastic Bags	50%
Fibre glass component	30%
Parts of glass	Nil

Whenever you make a claim, the motor insurer would not pay the full value of your car, now you would be wondering about the reasons for this scenario. One of the factors in Compulsory Deductible which is applicable on all motor insurance policies irrespective of the motor insurer you are choosing. Here you would have to pay certain portion of the claim amount first and thereafter the insurer steps in to pay the rest of the claim amount. The amount of deductible depends on the vehicle size, class and cubic capacity.

Second factor is the type of policy; if you have chosen a standard motor insurance then the insurer would give you claim amount arrived at after deducting depreciation value of the car from the market value of the car.

In order to get full value of car as claim amount you have to buy Zero Depreciation Add-On Cover which allows you to get the market value of car.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales

Mr. Mukesh Kumar recommends "getting your two wheeler insured from HDFC ERGO, a brand serving more than 1 crore+ customers. With overnight repair services and more than 6,800+ network garages, you can be assured of help in event of any damage to your vehicle

Few other articles

• Car insurance renewal checklist to follow

• Why You Should Opt for Zero Depreciation Add-On

• This festive season insure your car

• How can a Nil Depreciation Car Insurance Policy Help you with your Claim?

• 5 mistakes people make while buying car insurance

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