Things to know about depreciation factor in car insurance
Human beings are god’s creation and they too have a limit to dwell on this planet. Irrespective of some people having exceptional longevity, everyone has to leave at one time or another. Humans are god’s creation and when human being has to end life at some point of time, how can we expect man-made things to last longer? What about wear and tear!! Everything artificially manufactured has some amount of wear and tear to an extent or the other. Some may have high wear and tear and some may have less with respect to the material, usage, pressure, friction and time. Similarly, cars get depreciated too. Since they are made of metal which has high chances of depreciation and these vehicles are more prone to depreciation. It is basically the loss incurred to the monetary value of a car due to extensive usage with respect to time. This depreciation does not confine to a particular part but to the entire vehicle with time and usage and its price also gets affected in terms of its market value as depreciation is directly proportionate to time and usage.
However, the depreciation value for various parts of the car is different. Interestingly, there would be an overall depreciation along with the individual wear and tear of parts. For example, all parts except those which are crafted from glass are treated as vulnerable for depreciation as they have a confined lifetime and they get eroded with time. To assist the vehicle owners or probable buyers, the insurance companies help them save the depreciation amount which is generally calculated at an extent of 5% per annum. In simple terms, the older the car, the higher the rate of depreciation is and the lower the insurance coverage would be. Hence, the important things to know about depreciation factor in car insurance is that depreciation coverage is thereby an essential element to consume the amount of loss. However, there are various policies offered by the insurance companies to enable the car owners save the depreciating amount.
Zero Depreciation Car Insurance:
The name explains it all as zero depreciation offers a complete coverage or a comprehensive coverage as it is popularly called in the insurance world. The factors affecting the depreciation are nullified and hence there is no deduction as depreciation in such policies. In the event of a car damage due to an accident, and if it has zero depreciation coverage, the insurance company is bound to cover the entire amount leaving the actual amount of depreciation aside.
Comprehensive Car Insurance:
This kind of coverage caters to the car’s compensation following an accident but unlike the zero depreciation coverage, it takes into account, the existing value of the car. The value of loss incurred is compensated against the zero depreciation value calculated. So, when compared to zero depreciation coverage, the overall or standard comprehensive coverage caters to the existing value of the car and this is the important thing to know about the depreciation factor in car insurance.
Depreciation as an element:
Just like every other thing, every vehicle would depreciate basing on its longevity and usage. One needs to take into account various factors while calculating the depreciation value of a car. Every part of the car has a different lifetime and hence they collectively lead to an overall depreciation value. Since it is a machine, the cars’ engines and other parts are tested for their endurance with time.
Solution to depreciation:
Many of us opt for a basic comprehensive insurance coverage which is not inclusive of the additional features especially the depreciation coverage. One may not understand its benefits and hence ignore it. Such people may face it as a wrath in the event of an insurance claim processing. You have to be extremely careful if you own a car as experts suggest the car owners to go for full depreciation coverage so that the owner need not bear any losses if there is any damage. One has to realize that the premium payment is the only investment to get full depreciation coverage. The insurance companies offer a variety of add-on coverages to nullify the financial affect on vehicle owners at the time of claim processing. Or they at least try that their consumers have minimal impact in a claim.