Insurance demystified further

In our first article on car insurance we skimmed the surface of motor insurance – the hows and whys of insurance; how to make a claim and what to expect out of it. This time, we’re going to the next level. And don’t worry, it won’t be as confusing as Leonardo DiCaprio’s dreams. We’re the exception.

So you’ve purchased a comprehensive insurance policy along with your car, and you’ve made a claim for repairs thanks to the brainless rickshaw driver who had little grip and even less sense. However, you’ve still had to cough up money for repairs – isn’t that the job of the insurance company? Isn’t that why you paid a decent sum of money on a comprehensive plan instead of a cheap third party one? 

Repairs and replacement

The insurance company does pay for the repairs and replacement, but they follow a complex formula that determines the current value of the part. The key word here is “current”. It’s the same logic as the value of the car – if you tried to sell your car today you wouldn’t get the amount of money you paid for it when new, would you? The insurance company valuates the required parts accordingly and pays that much money for their replacement. You’ve to pay the rest, and this can amount to a pretty packet since plastic, nylon or rubber parts depreciate to half their original value in an insurance claim. Rubbing salt to the wound is the fact that these parts usually can’t be repaired; they have to be replaced, and finally, the bumpers are plastic – so any shunt will have you paying a fair amount. 

We did a little bit of legwork and here is a list of the usual depreciation amounts according to ICICI Lombard:

Rubber/nylon/plastic parts:  50 per cent

Fiberglass components: 30 per cent

Metal parts (age of car more than 6 months but less than one year): 5 per cent

Metal parts (age of car from 1-2 years): 10 per cent

Metal parts (age of car from 2-3 years): 15 per cent