Various add-on covers are offered by insurance companies to provide minimal financial impact on the car owners during claims. Find out how you can tackle the costs associated with your car's depreciation.
Depreciation factor in car insurance refers to the loss incurred to the value of the car with respect to time. It is obvious that each part of the car shall wear out with time and thus in an overall manner the price or market value of the car will depreciate as well. Though the depreciation value for different parts of the car varies, but there is also an overall depreciation value. For instance, all components rather than those made of glass are considered liable for depreciation as they have a limited life span and they wear out with time.
To help the car owners, their insurers help them save the cost of depreciation, which usually is somewhere near about 5% per year. The older is the car, the greater is the cost of depreciation, and thus the lower is the amount compensated by the insurer. To save this, a depreciation cover is most needed, that shall cover the cost of loss. There are different plans offered by car insurers that help the car owner save his cost of depreciation.
Zero Depreciation Cover:
As the name goes, zero depreciation cover promises to compensate a complete comprehensive coverage of the car, without considering the factors for depreciation. In case the car is damaged following an accident or collision, and is insured against zero depreciation cover, then the insurer will cover the entire cost irrespective of the fact of the value of depreciation.
Standard Comprehensive Cover:
A standard depreciation cover also takes care of the vehicle’s compensation after an accident or mishap, but unlike the zero depreciation cover it considers the current value of the car. It calculates the value of depreciation and compensates the value of loss incurred against it. Thus, in comparison a zero depreciation cover covers the entire cost of damage, but the standard depreciation covers the cost keeping in mind the ‘current-value’ factors of the car.
Depreciation Factor:
As all things wear out with time and depreciate, so is the case of a vehicle. Calculating the depreciation cost of a vehicle, there are a number of things that need to be kept in mind. Different parts in a vehicle carry a different life span, and so do they cumulatively result in an overall depreciation cost. From the engine to the body the entire vehicle loses its endurance with time. Thus with time there is a certain depreciation value associated with vehicles as per the below:
| Age Of The Vehicle | % Of Depreciation For Fixing IDV |
|---|---|
| Not Exceeding 6 Months | 5% |
| Exceeding 6 Months But Not Exceeding 1 Year | 15% |
| Exceeding 1 Months But Not Exceeding 2 Years | 20% |
| Exceeding 2 Months But Not Exceeding 3 Years | 30% |
| Exceeding 3 Months But Not Exceeding 4 Years | 40% |
| Exceeding 4 Months But Not Exceeding 5 Years | 50% |
Depreciation Remedy:
Several among us opt for just the basic comprehensive policy devoid of add-on features especially the Depreciation cover. You may choose to ignore its benefits until you get a rude shock during the claims processing. Moreover, in cases of luxury cars it is advisable to go for a full depreciation cover, such that no loss is incurred at the time of damage. The only investment in a depreciation cover is that of the cost of the premium, and the rest shall be covered under it.
