Depreciation is the decline in a automotive’s worth over the course of its helpful life. Sure elements in your car have a “life expectancy” so the worth of the half being repaired is at the moment lower than the brand new alternative half. Insurance coverage corporations in Hong Kong usually take this into consideration.
As soon as the insurance coverage firm repairs the car, they state that they’re reinstating it to a greater situation than earlier than the accident; this method is accepted follow within the Hong Kong authorized system. To account for this improved situation, there must be a depreciation adjustment.
For instance, Motor Automobile Insurance coverage corporations in Hong Kong will embrace coverage phrases stating that they aren’t answerable for the next clauses within the occasion of Automobile Personal-Harm:
- depreciation (betterment), put on and tear, mechanical or electrical breakdown, failure or breakage;
- harm to tyres until harm is triggered to different elements of the car on the similar time; and
- any extra relevant within the accident.
The quantity of depreciation and/or betterment shall be assessed by the insurance coverage firm’s appointed surveyor on any a part of the car for the prices of repairing or alternative.
An instance of depreciation:
A 5 yr outdated car was partially broken in an accident. The agreed restore price was decided to be $50,000 by the storage and the insurance coverage firm’s appointed surveyor. The quantity of depreciation was assessed to be 30% on the value of the changed elements or $15,000. The $15,000 depreciation was based mostly on the car’s age (5 years outdated), its situation (some put on and tear) and the mileage. The declare fee is the agreed restore quantity $50,000, much less the depreciation $15,000, much less all relevant excesses.
How typically does it happen? When does it apply?
There is no such thing as a customary fee for car depreciation and lots of insurance coverage corporations will calculate the depreciated worth of your automotive in a different way. A typical instance of depreciation for a model new car might be seen under:
- 1 yr after buy: -20 to 30% of unique worth
- 2 years after buy: -25 to 40% of unique worth
- 3 years after buy: -30 to 50% of unique worth
- 4 years after buy: -35 to 60% of unique worth
- 5 years after buy: -40 to 70% of unique worth
- 6 years after buy: -45 to 80% of unique worth
Depreciation on a car will decelerate 6 – 7 years after the unique buy and from this level the car will proceed to retain roughly 20 – 30% of the unique worth. The quantity of depreciation utilized will depend upon the age and pre-accident situation of the car, in addition to the mileage.
In case your car is lower than one yr outdated then it is probably not topic to depreciation within the occasion of a complete loss. Some motor insurance policies have ‘new for outdated’ cowl if a car is lower than one yr outdated and the declare is a complete loss. Nevertheless, depreciation is generally utilized in partial loss/harm conditions by the motorcar insurance coverage corporations whatever the age.
How can I shield myself from depreciation price?
- By protecting your car in the absolute best situation. Nevertheless, doing this won’t shield you from all depreciation prices.
- You possibly can permit your automotive to be repaired with second hand elements of an identical age and situation. Sadly these usually are not at all times obtainable.
- You possibly can totally shield your self by including a depreciation safety on to your automotive insurance coverage coverage. Then there shall be no depreciation adjustment to your car’s restore quote in case of a partial loss/harm.
Buy our new value-added protection “The Depreciation Waiver”
Kwiksure’s ‘Depreciation Waiver’ is the primary in Hong Kong. For a further premium we are able to add this endorsement to your motor insurance coverage coverage, making certain that any depreciation bills shall be waived within the occasion of a partial loss/harm declare.
Please ask our customer support representatives concerning the particulars of this waiver.
