Age-based depreciation used for insurance valuation, year by year.
Two kinds of depreciation in motor insurance
People often mix these up, and they behave very differently:
- Vehicle depreciation for IDV — reduces the sum insured as the vehicle ages (5% to 50% over five years). It decides what you get on theft or total loss.
- Depreciation on parts in a claim — reduces what the insurer pays for parts replaced in an ordinary repair (for example 50% on plastic and rubber parts). Zero-depreciation cover removes it.
Age-wise depreciation for fixing IDV
| Age of vehicle | Depreciation for IDV | IDV as % of ex-showroom |
|---|---|---|
| Not exceeding 6 months | 5% | 95% |
| Exceeding 6 months but not exceeding 1 year | 15% | 85% |
| Exceeding 1 year but not exceeding 2 years | 20% | 80% |
| Exceeding 2 years but not exceeding 3 years | 30% | 70% |
| Exceeding 3 years but not exceeding 4 years | 40% | 60% |
| Exceeding 4 years but not exceeding 5 years | 50% | 50% |
| Above 5 years | Mutually agreed | Based on market value |
Depreciation on parts replaced in a claim
| Part type | Depreciation on claim |
|---|---|
| Rubber, nylon and plastic parts, tyres, tubes, batteries, airbags | 50% |
| Fibreglass components | 30% |
| All glass parts | Nil |
| Painting — material part (25% of paint bill if not itemised) | 50% |
| Labour | Nil |
| Metal parts — age of vehicle | Depreciation |
|---|---|
| Not exceeding 6 months | Nil |
| 6 months – 1 year | 5% |
| 1 – 2 years | 10% |
| 2 – 3 years | 15% |
| 3 – 4 years | 25% |
| 4 – 5 years | 35% |
| 5 – 10 years | 40% |
| Above 10 years | 50% |
Insurance depreciation vs resale value
The insurance schedule is a convention, not a valuation of your particular car. Popular models with strong resale values can be worth more in the used market than their IDV, while vehicles that are discontinued or in poor condition can be worth less. For vehicles older than five years there is no fixed rate and the IDV is agreed with the insurer — our tool shows an indicative figure (5% extra per year) so you have a starting point.
Depreciation FAQs
Why does my car lose 15% in the first year when it was only a few months old?
The schedule works in slabs. Up to six months old, depreciation is 5%. The moment the vehicle crosses six months it moves to 15%, and that rate applies until it is one year old.
Is depreciation applied on glass in a claim?
No. Glass parts carry nil depreciation under standard policy wordings, so a windshield claim is not reduced by depreciation (deductibles still apply).
Does depreciation apply to labour charges?
No. Labour is paid without depreciation. On painting, depreciation applies only to the material portion.
Related: IDV depreciation rates explained · Depreciation on parts in a claim