Your car comes back from the garage looking right. The workshop bill matches the estimate they messaged you. Then the settlement letter arrives, and the figure is smaller than you expected. One thing that can explain this difference is less depreciation.
There is no error. This deduction is based on the rules in your insurance policy and a standard calculation table.
Most explanations of depreciation in insurance claim settlements stop at “your payout drops”, but the policy does not further explain what it actually means. In this blog, you’ll understand which parts get reduced, by how much, and why the gap between estimate and check is wide on some repairs and almost nothing on others.
Why Does Depreciation in Insurance Claim Settlements Exist at All?
A motor policy promises to put your car back the way it was. It does not claim to make it better than it was.
When a three-year-old bumper is smashed, the garage fits a brand new one. Your insurer pays for the worn part you lost, and you cover the jump in value.
Two things help lower these costs. Depreciation applies only to parts that are actually replaced, so repairing a panel costs you much less than getting a new one. Also, the four wheeler insurance company pays for all the labour costs regardless of how old your car is. Since labor is often the most expensive part of a small repair, this saves you money.
Depreciation in insurance claim files is never a judgement call by the surveyor who inspects your car. These rates are standard and apply at every workshop in the country.
Which Parts Lose Half Their Value, and Which Lose Nothing?
Material decides the rate. Those rates come from the standard motor policy wording approved by the Insurance Regulatory and Development Authority of India (IRDAI), the body that supervises insurers.
Rubber, nylon and plastic parts, tyres, tubes, batteries and airbags are settled at half their price. Fibreglass components are settled at 70 percent of their price.
Glass is the odd one out. Windscreens and windows carry no cut at all, however old the car is.
How Your Car’s Age Changes the Metal and Paint Bill
Depreciation on metal parts increases as your car gets older. Nothing is deducted in the first six months. From six months to a year, the rate is 5 percent. Two years in, it becomes 10 percent, three years 15 percent, four years 25 percent, five years 35 percent, and it becomes 40 percent until the car turns ten.
If you take the same dented door to the same repair shop, the replacement is free if your car is less than six months old. If your car is four years old, you will have to pay 25% of the cost for the part yourself.
The paint rules are often overlooked. The insurance company only deducts value from the cost of the paint materials, not from the labor cost. If the garage provides a single combined bill for painting, the insurer counts 25% of that total as the cost of materials, and the deduction only applies to that specific portion. Because of this, making sure the bill separates material and labor costs can change the final amount you have to pay.
Splitting that bill between paint material and paint labour therefore changes what you finally hand over.
What Happens If the Car Is Written Off?
If your car is considered a total loss, the insurance company uses a completely different set of rules to calculate your payment.
Insured Declared Value (IDV) is the agreed worth of your car for a given policy year, and works as the ceiling on any payout. Showroom price is trimmed by 5 percent in the first six months, then 15 percent by the first year, 20 percent at two, 30 percent at three, 40 percent at four, and 50 percent at five. After that, you and the insurer settle on a number together.
Any car is treated as a constructive total loss once repair costs cross 75 percent of that IDV. If your repair costs are less than this, your claim is calculated based on the specific parts replaced rather than a total loss.
Whether you buy ‘Own Damage Car Insurance‘ alone or as part of a package, the same calculation rules apply to your claim.
The rules for your claim payment depend on whether your car is a total loss or a partial repair.
What Zero Depreciation Cover Cannot Fix?
The zero depreciation add-on refunds the deducted amount on replaced parts after an accident. This coverage is most useful for newer cars that have many plastic parts. Plastic parts lose value quickly, and minor accidents are common, so this add-on helps cover those costs.
However, you are still required to pay a fixed deductible for each claim. If you make a claim, you will lose any safe driver discounts you have, but the value of your car’s coverage won’t increase. Other car parts like the tires and batteries are usually covered at only half their value, even if you choose this add-on. To avoid such surprise costs, make sure to request a detailed breakdown from your insurer when you receive your settlement letter.
This coverage helps close the gap between the repair estimate and the final insurance payment. Checking the policy tables in advance will help you know exactly what to expect.
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