Bharti AXA INSURANCE GLOSSARY Depreciation Depreciation Depreciation is the loss of value of an asset over time. This loss in value is resultant from general wear and tear of the asset. In accounting, depreciation also refers to the allocation of cost of a long-term asset to various periods in which the asset is used. For example, if you buy a car its value decreases with every passing year due to regular wear and tear. Also, if the car was purchased for a commercial purposes and the life of the car is assumed to be five years – the cost of the car would be accrued over the five year period when calculating its impact on the profit and loss of the commercial undertaking. For insurance purposes, the depreciation in the car’s value is calculated in two ways: The value of the car depreciates the moment it hits the road till 6 months by 5%, and continues to depreciate with every passing year. This depreciation is based on a fixed percentage and the schedule for the same is provided by IRDAI. If case of a partial loss of the car, i.e. in case the car requires repair, the depreciation is calculated based on the loss of value of different car parts that are to be replaced. As per the current guidelines provided by IRDAI, the depreciation is set at 50% on rubber parts, 30% of fibre parts, 0% on glass parts and up to 50% on other parts based on the age of the car. Request Call Back Category * - Select -CarTwo WheelerHealthTravelPersonal Accident Buy Renew Claim submit Related Posts Disclaimer : The information published on this website is for the public's reference only. Content of this information is to provide an overview of your Travel needs and should not be relied upon for personal, medical, legal or financial decisions and you should consult an appropriate professional for specific advice. Bharti AXA General Insurance Company Limited makes no representations about the suitability, reliability, timeliness, and accuracy of the information, travel, services, or any other items mentioned on this subject for any purpose whatsoever.