In 1983, the Government of India has made motor insurance compulsory with the Motor Vehicles Act. Despite the fact that motor insurance is mandatory, almost 60% of the vehicles on Indian roads do not have insurance. For those who do have a vehicle insurance, calculating their claim settlement following an accident, natural calamity or so on, becomes quite a task. Most prefer to blindly leave the matter to their insurer. Most people having insurance do not consider the depreciation factor when claiming for an insurance settlement.
It is important to know that the value of any car depreciates over time. People believe that they will be insured for the amount they first bought their car and in the process are disappointed when their claim settlement comes through - which is often lower that they expect. When calculating the Insured Declared Value (IDV) of a vehicle, insurers consider the current market value of the vehicle, the age and the condition of the car, resulting in a depreciation in the insurance claim as well. That said, there are some ways to tackle this depreciation problem all car owners face.
Types of depreciation covers:
To help car owners save costs faced because of depreciation, considering that every year the car's value depreciates by 5%, insurers offers their customers depreciation covers. Listed below are two types of depreciation covers:
Zero Depreciation cover:
One such add-on to a car insurance that is beneficial for car owners in every way is the zero-depreciation cover. As the name suggest, a zero-depreciation cover ensures that there is no depreciation in the car value or the claim settlement following an accident or a collision. A car owner can claim insurance for the entire amount of the car and factors (age, condition of the car) of depreciation will not come into play.
Standard Comprehensive cover:
The difference between the zero depreciation cover and the standard comprehensive cover is that insurers consider the current value of the car when calculating the claim settlement. In case of total damage to the car, the standard comprehensive cover will be beneficial to the car owner.
How the value of a car depreciates:
As time passes even the value of a car depreciates. In fact, some insurers offer no salvage for glass, rubber and plastic parts of the car as the value and quality of such materials are bound to depreciate over time. Listed below in the chart is how the market value of a car depreciates with every year. This is taken into account by insurers when calculating the claim settlement.
|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%|
When taking out an insurance, most people just to save on costs opt for basic insurance without add-on covers like the above mentioned depreciation cover. By doing so, they are in for a rude surprise during the claim processing period. Having a depreciation cover will ensure that one gets the actual amount he/she is claiming for, void of the depreciation factors. For those with expensive or luxury cars, opting for a complete depreciation cover is advisable as it saves on depreciation costs and does not alter the value of the vehicle in the case of claiming for insurance after an accident or collision.
- All You Need To Know Before Insuring Your Car In India
- Looking To Switch Insurance Companies? Read This
- Keep These Points In Mind Before Renewing Your Auto Insurance Policy
- Why Your Car Insurance Claim Was Denied
- Consumables Cover In Car Insurance - Coverage And Claim Process
- The Engine Protect Add-on Cover In Car Insurance Demystified
- Incorporate Changes In Your Car Insurance Policy Through Endorsements
- Why Should You Insure Your Car?
- Saving Money On Car Insurance Is This Easy
- When Should You Get Your Car Inspected?
- How Engine Capacity Of Your Car Is Important In Determining Its Insurance Rate
- When Should You Not Claim Under Your Car Insurance?
- Online Or Offline Purchase Of Motor Insurance - Which One Would You Choose?
- How To Detect Fraudulent Car Insurance Policies
- All You Need To Know While Insuring Your CNG Vehicle
- Points To Note Before Cancelling Your Car Insurance
- What You Should Know About IDV In Car Insurance
- How Insurers Calculate Premiums In India
- Get Adequate Protection Through Car Insurance Add-on Covers
- Bajaj Allianz Car Insurance Customer Care
- Bharti Axa Car Insurance Customer Care
- Chola Ms Car Insurance Customer Care
- Future Generali Car Insurance Customer Care
- HDFC ERGO Car Insurance Customer Care
- IFFCO Tokio Car Insurance Customer Care
- Liberty Car Insurance Customer Care
- Magma Hdi Car Insurance Customer Care
- National Car Insurance Customer Care
- New India Car Insurance Customer Care
- Oriental Car Insurance Customer Care
- Reliance Car Insurance Customer Care
- Royal Sundaram Car Insurance Customer Care
- SBI Car Insurance Customer Care
- Tata AIG Car Insurance Customer Care
- United India Car Insurance Customer Care
- Universal Sompo Car Insurance Customer Care
GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017