Have you recently bought a new car? If so, then congratulations on getting one. Now that you own your very own four-wheeler, it is time to think and account for depreciation on cars. Wondering what that is? This guide can help you understand just what car depreciation is and just how important a role it plays during car insurance claims. So, let’s begin by first trying to understand the concept of car depreciation.
What is Car Depreciation?
Let’s say that you buy a car worth Rs. 10 lakhs. Now, as time passes, the value of the car tends to go down on account of regular wear and tear. Assume that after about two years, due to normal wear and tear, the value of the car drops down to Rs. 8 lakhs. Now, this loss in value of Rs. 2 lakhs is what is termed as depreciation on cars. That’s not all. As the car gets older, the rate of car depreciation also tends to increase, leading to a higher loss in value.
Does Depreciation Have Any Effect on Car Insurance Claims?
Now that you know what depreciation on cars is, let’s take a look at how it affects your insurance claims.
Car depreciation kicks in as soon as you drive the vehicle out of the showroom. Let’s say that you get into an unfortunate accident just 3 months after you purchased your vehicle. As a result of this accident, your car’s windshield gets cracked. And it costs around Rs. 5,000 to replace the same. Since you have a comprehensive car insurance policy, you choose to lodge an insurance claim, hoping to use the funds to repair your vehicle.
But due to the depreciation factor on your car, your insurance service provider will only cover a percentage (say 80%) of the repair amount. The remaining 20% of the amount will have to be borne by you out of your own pocket. Now, as the car ages, the percentage of coverage provided by the insurer will also decline, thereby increasing the cost on your wallet for any repairs.
Is There Any Way to Negate the Effect of Depreciation on Car Insurance Claims?
Fortunately, there’s a way to avoid depreciation coming into play during a car insurance claim. All that you would need to do is opt for an add-on called ‘zero depreciation cover’ over and above your base comprehensive car insurance policy. This add-on will ensure that you receive the entire insurance claim amount without any depreciation cuts whatsoever.
That said, here’s something that you should know. The zero depreciation add-on cover is only available for new vehicles. In addition to that, this add-on can be availed only for a specific period of time, say 3 years or 5 years, depending on the insurance service provider.
Conclusion
As you can see from the above, depreciation on cars is something that has to be taken very seriously. Also, it is crucial to properly account for it as well to ensure that you get your entire car insurance claim amount.
Looking to renew your car insurance policy? Head on over to Finserv MARKETS. It is an online marketplace for all things insurance. You can browse through multiple car insurance plans, compare their features, and even get a quote instantly. So go on, check out Finserv MARKETS right away.
