Find your suitable insurance plan
3916
4 min read
Though a mandatory motor insurance policy ensures that you get financial assistance whenever your vehicle faces any damage, the entire depreciation claim on car is not paid by the insurance company. There are some deductions from your claim amount and then the company settles the claim. The car depreciation rate is one such deduction which affects your claim amount. Do you know how depreciation is calculated when your claim is settled? You will learn the same in this blog post.
The rate of depreciation is different for the different parts of your vehicle. Here is how the schedule of depreciation looks like:
| Depreciation for your car’s plastic and rubber parts | The rate of depreciation is 50% |
| Depreciation for your car’s fiber glass parts | The rate of depreciation is 30% |
| Depreciation on metal parts | The rate of depreciation is 0% for the first 6 months. From the 7th month onwards, the metal parts depreciation rate depends on the age of the car. It is 5% in the first year, 10% in the second year, 15% in the third year and so on |
| For any paint related job | The rate of depreciation is 50% |
Also Read: Best car insurance in India
When you make a motor insurance claim, the depreciation is deducted depending on the parts repaired and their respective claim depreciation on car. Let us understand with an example:
Suppose your car suffers damage and is handed for repairs. Here is what the estimated bills look like:
Repairs to broken window – Rs.10, 000
Repairs to plastic parts – Rs.5000
Servicing charges – Rs.10, 000
Total – Rs.25, 000
For this claim, the company would pay the following admissible amount :
Claim payable for repairs to broken window = Rs.10, 000 – 30% depreciation = Rs.10, 000 – Rs.3000 = Rs.7000
Claim payable for repairs to plastic parts = Rs.5000 – 50% depreciation = Rs.5000 – Rs.2500 = Rs.2500
Claim payable for servicing charges – Rs.10, 000
Total claim payable = Rs.7000 + Rs.2500 + Rs.10, 000 = Rs.19, 500
However, if the garage presents a consolidated bill wherein the costs are aggregated and also include painting, 25% of the bill amount would be subject to 50% of depreciation. So, for instance, the above of Rs.25, 000 is presented in one consolidated bill and the car has undergone a fresh layer of paint, 25% of the bill which is Rs.6250 would be subject to a 50% depreciation claim on car. Thus, depreciation of Rs.3125 would be deducted from the total bill and the claim would be settled for Rs.21, 875.
Also Read: BH number plate
In case of Constructive Total Loss or theft of your vehicle, the Insured Declared Value (IDV) is paid. The IDV represents the market price of the vehicle less depreciation based on the age of the car. For IDV calculation, the rate of depreciation is as follows:
| Age of the car | Rate of depreciation |
| Up to 6 months | 5% |
| Above 6 months but up to 1 year | 15% |
| Above 1 year but up to 2 years | 20% |
| Above 2 years but up to 3 years | 30% |
| Above 3 years but up to 4 years | 40% |
| Above 4 years but up to 5 years | 50% |
So, if your vehicle was bought for Rs.5 lakhs 2 years before, the applicable IDV would be Rs.5 lakhs – 20% = Rs.4 lakhs. Rs.4 lakhs would be payable if your car gets stolen. In case of a total loss Rs.4 lakhs minus the salvage value, would be payable.
This is how depreciation is calculated for settling claims.
If you are worried of your out-of-pocket expenses due to the effect of depreciation on your car’s parts, you can opt for a zero depreciation add-on cover in your policy. This cover nullifies the effect of depreciation and the insurance company pays the entire claim without deducting depreciation. For reducing IDV, you can choose the add-on cover called Return to Invoice which pays the invoice value of your vehicle in case of a total loss or theft.
So, know the rate of depreciation calculated on your vehicle’s parts and also on your vehicle as a whole. Understand how such depreciation affects your claim settlement. Opt for a zero depreciation cover motor insurance policy to protect the value of your car’s parts being reduced due to depreciation and enjoy a higher claim amount. So, be wise with your motor insurance policy and ensure maximum claim settlement.
Choose wisely!
Browse PayBima Blogs to read interesting posts related to Health Insurance, Car Insurance, Bike Insurance, Term Life Insurance, and Investment section. You can visit PayBima to Buy Insurance Online.
PayBima Team
PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.
When it comes to buying a car, it is very likely to get confused as there are so many new car models, brands, and categories.
Apr 01, 2024
4 min read 
Shalini is a passionate traveler. She loves exploring new destinations. To fulfill her travel dreams, Shalini looks forward to long weekends and vacations. However, she.
Feb 21, 2024 4 min read 
Updated on Feb 22, 2024 Understanding in depth how the rate of car depreciation is calculated every year in India and what it means for.
Feb 01, 2024 4 min read 
Updated on Jan 07, 2024 A car insurance policy number is a basic requirement during accidents, mishaps or at regular traffic police checking. Let us.
Jan 07, 2024 4 min read 
Updated on Jan 07, 2024 For keeping the environment clean and pollution free, people have now started using Electric Vehicles in India widely. Let us.
Jan 07, 2024 4 min read 
Updated on Jan 05, 2024 Everything you need to know about motor vehicle/car inspection as part of the insurance claim process. A car is one.
Jan 05, 2024 4 min read 
Updated on Jan 05, 2024 Pollution is a huge threat that has been contributing severely to the deteriorating health of people in India. A major.
Jan 05, 2024 4 min read 
Updated on Jan 03, 2024 We know that third-party car insurance is mandatory, and without this cover, you cannot drive vehicles in India. But, even.
Jan 03, 2024 4 min read 
Updated on Jan 03, 2024 If you are a four-wheeler owner, buying car insurance is not just a legal obligation but also necessary for your.
Jan 03, 2024 4 min read 
Updated on Jan 01, 2024 With digitization taking over everything, the process of buying new four-wheeler insurance in India has become a convenient and effortless.
Jan 01, 2024 4 min read 
Mahindra Insurance Brokers Limited (A Mahindra Group Company) - Unit-202, A-Wing, 2nd Floor, Amiti Building, Agastya Corporate Park, Kamani Junction, LBS Marg, Kurla West, Mumbai - 400070. Tel: +91 22 66423800
Licenced by IRDAI License No. 261; License Validity : 17-05-2025; Category : Composite Broker; CIN : U65990MH1987PLCO42609 Member of Insurance Brokers Association of India (IBAI).
Insurance is the subject matter of solicitation.
For a seamless experience, use the latest version of Chrome/Firefox/Internet Explorer.
Copyright © 2024 Mahindra Insurance Brokers. All Right Reserved.
Get A Call Back