Depreciation’s Impact: How It Affects Your Car Insurance Claim
Did you know that an old vehicle is less valued than a new car, whether it’s reselling or buying? Blame it on the depreciation factor of the car components. So, what do you mean by depreciation?
Every year, the cost of the car reduces, reflecting on the overall resale value. So, why does a pre-owned vehicle cost less than the new one? The reason might be vehicle insurance depreciation.
Simply put, it is a factor that affects the overall financial value of a car owing to the wear and tear occurring naturally on the car over the years.
Depreciation in car insurance policy is the total value lost from a car’s price when it is new. Factors that influence it are the vehicle’s mileage, condition, and age. Also, the car year and model number determine the depreciation.
Attend further details on Kotak Car Insurance by visiting the official website today. Until then, here’s how the depreciation factor affects car insurance.
As briefly stated above, depreciation has a financial impact on the car’s value. The cost of the vehicle insurance policy (or premium) depends on the value. So, when the car’s value reduces, the car insurance’s online or offline expense also decreases. Here are the factors affecting the car depreciation rate:
- Age and Mileage: If the car age is more, so will the depreciation value. As it ages, the depreciation percentage increases accordingly. The same goes for the kilometres run or mileage covered by the vehicle.
- Car’s Model: Reputation earned in manufacturing trusted vehicles also impacts the depreciation rate. If the brand has acquired a name, the depreciation rate is less. Car owners get a higher value for these vehicles in the second-hand vehicle market.
- Fuel Type: Fuel-efficient vehicles like electric and hybrid cars retain value for a longer span since they have slower depreciation rates.
- Car’s Condition and Maintenance: The depreciation value will be higher if a car has performance issues or makes rattling noises. On the contrary, a well-maintained car’s depreciation value will be less.
Buying a zero depreciation add-on can assist you in getting more money during the claim settlement. A Zero Depreciation Car insurance add-on allows the insurance company to consider your depreciation as zero when calculating the claim. The add-on is available with the car insurance renewal online.
Note that the depreciation on car parts is calculated according to the manufacturing year of that car. It helps calculate the claim amount if the specific part has been damaged. The insurance company calculates the cost of damage and deducts the depreciation amount from the claim amount in accordance with the car’s age.
The depreciation rate on the vehicle’s nylon, rubber, battery, and plastic parts is calculated at 50%. On the other hand, fibreglass parts are calculated as 30%. Damage to wooden parts includes a depreciation rate calculated as per the car’s age. Note that there will be no depreciation rate on any glass parts in case they are damaged.
Want to reduce the impact of depreciation on your Kotak Car Insurance? You may consider an add-on when buying the insurance policy for the new vehicle while renewing car insurance.