Introduction
Every vehicle experiences depreciation over time — the longer it’s used, the lower its value. This affects not only resale price but also the amount you can claim on insurance.Many car owners don’t realize that current market value is used as the basis for insurance claims. This article explains how vehicle depreciation impacts insurance and provides tips to protect your car’s value.
1. What Is Vehicle Depreciation
- Depreciation is the drop in a vehicle’s value due to age, usage, and external factors.
- New cars usually experience the highest depreciation within the first 2–3 years.
- Factors like mileage, car condition, and accident history affect the depreciation rate.
2. Impact of Depreciation on Insurance Claims
- Market Value: Insurers pay based on the current market value, not the original purchase price.
- Total Loss / Written-Off: Depreciation can reduce the compensation amount.
- NCD: Large claims can affect your No-Claim Discount, and depreciation increases the risk of net loss.
- Add-on Coverage: Some add-ons, such as Agreed Value, help protect against depreciation losses.
3. Tips to Avoid Loss from Depreciation
- Consider Agreed Value coverage if your car is older or has a high value.
- Keep complete maintenance records to improve your car’s value during a claim.
- Compare market value before renewal — ensure your insurance aligns with your car’s current price.
- Claim promptly after an accident to prevent further loss in car value.
Conclusion
Vehicle depreciation is a crucial factor that affects your insurance claim amount. By understanding current market value and using strategies such as Agreed Value coverage, car owners can protect themselves from losses during a claim. Always check your car’s value before renewing insurance and ensure documentation is complete for a smoother claims process.
Read More:
How to Transfer NCD to a New Car
