What is Depreciation Reimbursement in Car Insurance? A Complete Guide

However, you can avoid this scenario with depreciation reimbursement in car insurance! This add-on feature to your car insurance policy ensures you receive compensation that covers the cost of replacing the damaged parts with new ones, without the depreciation. It acts like a financial safety net that protects the value of your car. At Shriram General Insurance, we are here to give you all the information you need about depreciation reimbursement and how to add it to your insurance policy. Read on!

 

Why choose depreciation reimbursement car insurance?

Having depreciation reimbursement car insurance is like waving a magic wand over your car’s value. It is a safety net for your finances and acts like an extended warranty to ensure you don’t spend out of your pocket when it comes to repairs. Depreciation, or the reduction of the value of your car and its parts, can significantly impact how much you can get from your insurance claim. With the depreciation reimbursement add-on for your car insurance, you can have peace of mind that your repairs will be covered at full replacement cost.

 

Understanding Depreciation and Its Impact on Car Insurance Claims

In insurance, depreciation refers to the reduction in the value of an asset because of age. Depreciation affects the amount that you receive from an insurance claim for car repairs or part replacements. As your vehicle ages and experiences wear and tear, its parts lose value, leading to a reduced claim amount and potentially higher out-of-pocket costs.
Here is how insurers calculate the depreciation on car parts:

 

Depreciation rate chart

Here is a standard rate chart used by most insurance companies to determine the depreciation of your car parts based on the age of your car:

 

Age of the Vehicle	Depreciation Rate
Less than 6 months	Nil
6 months to 1 year	5%
1 to 2 years	10%
2 to 3 years	15%
3 to 4 years	25%
4 to 5 years	35%
5 to 10 years	40%
Exceeding 10 years	50%

 

Depreciation rate for specific parts

There are also specific depreciation rates for specific car parts. Here they are:

Type of Part	Depreciation Rate
Metal and wooden parts	As per vehicle age (refer to chart above)
Rubber/ nylon / plastic parts, tyres and tubes, batteries and air bags	50%
Fibre glass components	30%
Glass parts (e.g., windshields)	0% (No depreciation)

 

What is a depreciation reimbursement add-on in car insurance?

Depreciation reimbursement means that you get full compensation for the replaced parts of your car, without the deduction of depreciation. It is also called a Zero Depreciation Add-on. This is a particularly beneficial add-on if you are a first-time car owner or are buying a high-end model. With depreciation reimbursement, you can say bye to out-of-pocket expenses for repairs!

 

Here is how the depreciation reimbursement add-on works:

• When you make a claim, the cost of the replacement parts is fully paid for by the insurer, without any depreciation deductions.
• Depreciation reimbursement typically covers the cost of batteries, tyres, and plastic or metal parts.
• The add-on can be included in your car insurance policy right from the time of purchase, or whenever you renew it.

 

Benefits of depreciation reimbursement coverage

Here are all the benefits of choosing add-on depreciation reimbursement in your car insurance policy:

1. Enhanced coverage: You get complete coverage for your car’s parts without considering depreciation.

2. Cost-effective: Even though you might end up paying a higher premium because of the depreciation reimbursement add-on, you will save a lot of money in the long term on repairs.

3. Retainment of vehicle value: The resale value of your car is retained, because it will stay in better condition due to genuine part replacements in case of accidental damage.

4. Peace of mind: You will sleep better knowing that depreciation won’t affect your insurance claims!

 

Exclusions of depreciation reimbursement cover

Depreciation reimbursement in car insurance sure sounds like a dream, but there are always exceptions to everything. Don’t get caught off-guard the next time when making a claim! Here are the things that are excluded in the add-on:

1. Normal wear and tear of your car

2. Mechanical breakdowns or any other mechanical and electrical failures

3. Non-accidental damages, or damages not caused by covered perils

4. Cars older than a specific age as stipulated by your insurer (typically five years)

 

Factors affecting the premium of car insurance with depreciation reimbursement

1. Vehicle age and model: If your car is high-end or the latest model, you may end up paying a higher premium because of the cost of the parts.

2. Claim history: If you have a history of making frequent claims in the past, your premium may increase.

3. Location: If you live in a place that is prone to accidents or natural disasters, you might pay a higher premium than those who do not.

4. Add-ons: Any additional add-ons that you choose will contribute to a higher premium.

 

How to get depreciation reimbursement coverage

Here’s what you need to do before you get depreciation reimbursement in your car insurance policy:

1. Evaluate your needs: Based on your vehicle’s age, how you use it, and any other personal preferences you may have, determine if you require the add-on.

2. Consult your insurer: Speak to your insurance provider about getting the add-on zero depreciation or depreciation reimbursement policy.

3. Read the fine print: Ensure you read the documents, all the terms and conditions, and the limits and exclusions of the add-on policy before you purchase it.

 

Shriram General Insurance’s Zero Depreciation Add-on: Take a step further to protect your vehicle

You need not look anywhere else for a depreciation reimbursement policy! Shriram Car Insurance Zero Depreciation Add-on covers the full cost of repairs and replacements while protecting your car parts from depreciation. Here are some of the benefits you get:

●  Extensive protection: Shriram Car Insurance’s Zero Depreciation Add-on covers all the components of your vehicle, including the body, plastic, and rubber parts, ensuring that you are fully protected in case of an accident.

●  Exempt from additional expenses: With the Zero Depreciation Add-on, you do not have to pay for the depreciation of your car’s parts. This means that you can fully claim the entire amount for replacements and repairs!

● Enhanced vehicle durability: By opting for the Zero Depreciation Add-on, you can replace damaged parts with new ones in the event of policy-approved accidental damage, enhancing their longevity and durability.

Drive in peace with Shriram General Insurance’s Zero Depreciation Add-on!

 

Summing up

Depreciation reimbursement in car insurance is especially beneficial for new car owners and is a valuable add-on that saves you from bearing the financial burden of depreciation costs. Getting it is always a good idea, and you get to have a worry-free driving experience! What’s more, you significantly enhance your vehicle’s overall insurance coverage as well. We hope this blog explained everything you wanted to know about this beneficial add-on!

 

FAQs

1. How does depreciation reimbursement work?

Depreciation reimbursement ensures that when you claim replaced parts under your insurance policy, you get fully compensated without any depreciation reduction.

 

2. Does depreciation reimbursement in car insurance cover all parts?

Consumable parts such as batteries, tyres, plastic, and metal parts are generally covered under depreciation reimbursement. Parts that are subject to normal wear and tear, or any mechanical breakdowns and failures are not covered under the add-on.

 

3. Is depreciation reimbursement worth it for older cars?

Depreciation reimbursement is typically recommended for newer cars. Older vehicles might not benefit from this add-on and might not be offered it by insurers.

 

4. How much does depreciation reimbursement add to my premium?

Factors like your vehicle’s age, make, model, and your claim history can contribute to the cost of adding depreciation reimbursement to your policy. The premium may slightly increase, but it is beneficial and saves money in the long run.