Depreciation
Reimbursement
for Car Insurance

What is Depreciation? How is Depreciation Calculated?

Regular wear and tear caused by constant usage of the vehicle leads to depreciation in the value of your car’s parts. When you raise a claim for accidental damage, the rate of depreciation affects the payout that you ultimately get. Now, you may wonder about the rate at which depreciation gets calculated. The depreciation cost deduction is determined by IRDAI to ensure standardisation across insurers. Here is a look at this rate:

• For all rubber/ nylon / plastic parts, tyres, tubes, batteries and air bags - 50%
• For fibre glass components - 30%
• For all parts made of glass - Nil
• Rate of depreciation for all other parts including wooden parts will be as per the following schedule.

Rate of Depreciation for Painting: In the case of painting, the depreciation rate of 50% shall be applied only on the material cost of total painting charges. In case of a consolidated bill for painting charges, the material component shall be considered as 25% of total painting charges for the purpose of applying the depreciation.

As we can see, the rate of depreciation is quite high once the vehicle crosses two years of age. Thus, as a vehicle owner, a large chunk of the claims cost might end up coming out of your own pocket. This is where having a depreciation reimbursement Add-On can take care of your financial liabilities.

What is Depreciation Reimbursement Add-On in Car Insurance?

Depreciation reimbursement or zero depreciation in car insurance is an add on cover with which your insurer pays you the value of a claim without considering depreciation costs. These depreciation costs mainly affect the parts of your car that are made from certain materials such as rubber, fibre glass, or plastic. Common examples of car parts that usually get impacted by depreciation costs are airbags and tyres.

Without depreciation reimbursement Add-On, you would end up shouldering a lot of the costs affecting these parts on your own. And if you have a high-end vehicle, the price for such parts can add up to quite a bit.

Now that we know what is depreciation reimbursement Add-On in car insurance, let’s look at what this Add-On really covers.