Depreciation is the decline in a automotive’s worth over the course of its helpful life. Sure components in your automobile have a “life expectancy” so the worth of the half being repaired is at present lower than the brand new substitute half. Insurance coverage corporations in Hong Kong usually take this into consideration.
As soon as the insurance coverage firm repairs the automobile, 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 Car Insurance coverage corporations in Hong Kong will embrace coverage phrases stating that they aren’t accountable for the next clauses within the occasion of Car Personal-Harm:
- depreciation (betterment), put on and tear, mechanical or electrical breakdown, failure or breakage;
- injury to tyres except injury is prompted to different components of the automobile on the similar time; and
- any extra relevant within the accident.
The quantity of depreciation and/or betterment can be assessed by the insurance coverage firm’s appointed surveyor on any a part of the automobile for the prices of repairing or substitute.
An instance of depreciation:
A 5 12 months previous automobile was partially broken in an accident. The agreed restore value 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 components or $15,000. The $15,000 depreciation was based mostly on the automobile’s age (5 years previous), 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 usually does it happen? When does it apply?
There is no such thing as a customary fee for automobile depreciation and lots of insurance coverage corporations will calculate the depreciated worth of your automotive in another way. A typical instance of depreciation for a model new automobile will be seen beneath:
- 1 12 months after buy: -20 to 30% of authentic worth
- 2 years after buy: -25 to 40% of authentic worth
- 3 years after buy: -30 to 50% of authentic worth
- 4 years after buy: -35 to 60% of authentic worth
- 5 years after buy: -40 to 70% of authentic worth
- 6 years after buy: -45 to 80% of authentic worth
Depreciation on a automobile will decelerate 6 – 7 years after the unique buy and from this level the automobile 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 automobile, in addition to the mileage.
In case your automobile is lower than one 12 months previous then it is probably not topic to depreciation within the occasion of a complete loss. Some motor insurance policies have ‘new for previous’ cowl if a automobile is lower than one 12 months previous and the declare is a complete loss. Nevertheless, depreciation is generally utilized in partial loss/injury conditions by the motorized vehicle insurance coverage corporations whatever the age.
How can I shield myself from depreciation value?
- By holding your automobile in the absolute best situation. Nevertheless, doing this is not going to shield you from all depreciation expenses.
- You may permit your automotive to be repaired with second hand components of the same age and situation. Sadly these aren’t at all times out there.
- You may absolutely shield your self by including a depreciation safety on to your automotive insurance coverage coverage. Then there can be no depreciation adjustment to your automobile’s restore quote in case of a partial loss/injury.
Buy our new value-added protection “The Depreciation Waiver”
Kwiksure’s ‘Depreciation Waiver’ is the primary in Hong Kong. For a further premium we will add this endorsement to your motor insurance coverage coverage, guaranteeing that any depreciation bills can be waived within the occasion of a partial loss/injury declare.
Please ask our customer support representatives in regards to the particulars of this waiver.