Depreciation is the decline in a car's value over the course of its useful life. Certain parts on your vehicle have a "life expectancy" so the value of the part being repaired is currently less than the new replacement part. Insurance companies in Hong Kong normally take this into consideration.
Once the insurance company repairs the vehicle, they state that they are reinstating it to a better condition than before the accident; this approach is accepted practice in the Hong Kong legal system. To account for this improved condition, there needs to be a depreciation adjustment.
For example, Motor Vehicle Insurance companies in Hong Kong will include policy terms stating that they are not liable for the following clauses in the event of Vehicle Own-Damage:
The amount of depreciation and/or betterment will be assessed by the insurance company’s appointed surveyor on any part of the vehicle for the costs of repairing or replacement.
A five year old vehicle was partially damaged in an accident. The agreed repair cost was determined to be $50,000 by the garage and the insurance company’s appointed surveyor. The amount of depreciation was assessed to be 30% on the price of the replaced parts or $15,000. The $15,000 depreciation was based on the vehicle’s age (five years old), its condition (some wear and tear) and the mileage. The claim payment is the agreed repair amount $50,000, less the depreciation $15,000, less all applicable excesses.
There is no standard rate for vehicle depreciation and many insurance companies will calculate the depreciated value of your car differently. A typical example of depreciation for a brand new vehicle can be seen below:
Depreciation on a vehicle will slow down 6 - 7 years after the original purchase and from this point the vehicle will continue to retain approximately 20 - 30% of the original value. The amount of depreciation applied will depend on the age and pre-accident condition of the vehicle, as well as the mileage.
If your vehicle is less than one year old then it may not be subject to depreciation in the event of a total loss. Some motor policies have ‘new for old’ cover if a vehicle is less than one year old and the claim is a total loss. However, depreciation is normally applied in partial loss/damage situations by the motor vehicle insurance companies regardless of the age.
Kwiksure’s ‘Depreciation Waiver’ is the first in Hong Kong. For an additional premium we can add this endorsement to your motor insurance policy, ensuring that any depreciation expenses will be waived in the event of a partial loss/damage claim.
Please ask our customer service representatives about the details of this waiver.
Kwiksure has over 20 years of experience in the car insurance industry, comparing quotes from over 60 insurers in Hong Kong. Use our online quotation tool now to get a free car insurance quote!
The above information is for reference only. Kwiksure takes no responsibility for the accuracy and timeliness of the information. For the coverage, mode of compensation, benefit limit and premium levels of any specific insurance plan, please refer to the relevant policy terms.
Kwiksure is a licensed motor insurance brokerage company with over 20 years of experience in insurance. The company strives to simplify insurance and select the best insurance plans for customers that fit their budget and coverage needs.
Kwiksure provides a range of insurance products, including car insurance, motorcycle insurance, cross-border insurance between Hong Kong and Mainland China, home insurance, travel insurance, domestic helper insurance, and voluntary medical insurance. The team has been named "Best Car Insurance Broker" and "Outstanding Leadership Award" by various media outlets over the years.
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