All about the depreciation factor in car insurance


04 Aug 2023

Read about All about the depreciation factor in car insurance . For more information, check out the car insurance policy from Kotak General Insurance.

There is an essential working factor termed the depreciation factor. It is the technical term to denote the loss of the value of the concerned vehicle that naturally occurs with time. With time all the parts of any car will undergo natural wear and tear, reducing its overall market value. All the components except for the glass parts are considered to possess a definite lifespan and are therefore liable for undergoing depreciation.

There are several cashless car insurance provisions to save the cost of depreciation designed by the insurance providers. The standard depreciation calculation rate stands at approximately 5% every year. The older the concerned vehicle becomes, the more rises the depreciation cost. This further lowers the insurer’s compensation amount. A depreciation cover is essential to avoid such circumstances, which effectively covers such losses. Car insurers have designed several plans for aiding car owners to save the depreciation cost.

Zero depreciation cover

True to its name; Zero Depreciation Cover offers full comprehensive compensation cover for the concerned car without considering the depreciation factor. If the vehicle with zero depreciation cover gets damaged under accidental circumstances, the insurer will offer complete coverage without considering the depreciation value.

Standard depreciation cover:

This also feels the value of the concerned vehicle after any accidental occurrence. However, unlike the Zero Depreciation Cover, this exclusively considers the current value of the concerned vehicle. It considers the depreciation value and compensates the loss incurred against the value.
Therefore, Zero Depreciation Cover offers coverage for the total damage cost, while standard depreciation covers only retaining the “current value” factor.

Depreciation factor

Each and everything experience natural wear and tears with time, and the vehicle is also no exception to this rule.
You need to keep several factors in mind while calculating the depreciation factor of any concerned vehicle. All the different parts of one particular vehicle carry separate life spans, but they collectively contribute to the calculation of the overall depreciated value of that vehicle.

However, the calculation of the depreciated value of any concerned vehicle follows a specific standard rule:



Not exceeding 6 months


Exceeding 6 months but within 1 year


Exceeding 1 year. Still, within 2 years,


Exceeded 2 years. Still, within 3 years,


Exceeded 3 years. Still, within 4 years,


Exceeded 4 years. Still, within 5 years



While opting for car insurance, most of us tend to opt for the basic third-party or comprehensive plan without any rider. However, choosing suitable riders effectively enhances policy coverage. It is better to stay covered from the beginning rather than experience any rude and nasty damage or loss. Opting for a full depreciation cover is a wise step to experience protection against unnecessary financial losses.

Team Kotak GIC

The content of this blog has been created and carefully reviewed by the esteemed team at Kotak General Insurance, with the sole purpose of providing valuable guidance and sharing insights on the importance of general insurance. Our objective is to assist users in making informed decisions when purchasing or renewing insurance policies for their cars, bikes, and health. Our expertly curated information aims to empower our readers with the knowledge they need to protect their valuable assets and financial interests.