Whenever a claim is made in car insurance, the payouts are made after considering the reduced value of some parts based on their rate of depreciation. The payment is made for the reduced amount and not for the cost of replacement of the part.
The rates of depreciation are as mentioned below:
- In case of a paint job, a depreciation rate of 50% is applied to the material cost of the paint. In case a consolidated amount is charged for the paint job, then the cost of paint material is considered to be 25% of the total cost and the 50% rate of depreciation is applied on it.
- For all rubber/ nylon / plastic parts, tyres and 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:
Motor Insurance Depreciation Chart
| Age of Vehicle | % Depreciation |
| Not exceeding 6 months | NIL |
| Exceeding 6 months but not exceeding 1 year | 5% |
| Exceeding 1 year but not exceeding 2 years | 10% |
| Exceeding 2 years but not exceeding 3 years | 15% |
| Exceeding 3 years but not exceeding 4 years | 25% |
| Exceeding 4 years but not exceeding 5 years | 35% |
| Exceeding 5 years but not exceeding 10 years | 40% |
| Exceeding 10 years | 50% |
Depreciation of metal parts in insurance will also be based on the above table.
So just to give you an example, if any part made of fibre glass is to be replaced, the insurance company will only pay 70% of the cost of replacement – this is because 30% depreciation if applicable for fibre glass parts. So if a part costs Rs. 10,000 you would have to bear the balance Rs. 3,000 in case of a replacement.
Or in the case of a paint job, which costs Rs. 15,000 and the cost of the paint in the job is Rs. 3,000, the insurance company will only pay 50% of the cost of the paint. So you will have to shell out Rs. 1,500 from your pocket.
Fortunately some companies offer Zero Depreciation Cover as an Add-On for relatively new cars. Check out more details on Zero Depreciation cover in car insurance.
