-
Renew policy in 2 minutes*
-
21+ Insurers to choose
-
1.2Cr+ Vehicles Insured
Renew policy in 2 minutes*
21+ Insurers to choose
1.2Cr+ Vehicles Insured
We have found best plans for you!! Our advisor will get in touch with you soon.
Every vehicle loses its value as it ages. It has a direct impact on its cost, resale value, and consequently, car insurance premiums. Hence, this makes it important to understand what causes vehicle depreciation so you can choose the right car insurance policy. This article explains what the vehicle depreciation rate is, how it's calculated, and its impact on car insurance premium prices.
Car depreciation rate, or vehicle depreciation rate, is the loss of the value of a car over the years. This is because of vehicle aging, mileage, and the usual wear & tear. As soon as you take a vehicle out of the showroom, its market value starts declining. Depreciation is driven by age, usage, wear and tear, market demand, and vehicle type (internal combustion vs electric).
The calculation of the vehicle depreciation rate is simple. Here is the formula:
Vehicle Depreciation Rate = ((Vehicle's Original Cost- Current Market Value) / Original Cost) x 100
So, for example, you own a car with the original price of Rs. 15,00,000, and the current market value of Rs. 12,00,000.
In this case, the motor vehicle depreciation rate will be:- ((15,00,000 - 12,00,000)/15,00,000) X 100, which is 20%.
If you match this car depreciation rate as per the standard fixed by IRDAI (Insurance Regulatory and Development Authority of India), your four-wheeler comes about 2 to 3 years old.
Another method to calculate the vehicle depreciation rate is through the depreciation calculator, which will help you determine the Insured Declared Value (IDV) value for your car.
A vehicle or car depreciation calculator is an online tool that lets you estimate your car's market value, which directly impacts the car insurance premium. With the help of this calculator, you can determine your car's depreciated value after it has been used.
To know your vehicle's market value using this online tool, you can visit the car depreciation rate calculator page on Policybazaar.com and follow these steps:
The table below highlights the standard car depreciation rates in India as set by IRDAI. Have a look:
Age of the Vehicle | Vehicle Depreciation Rate |
Less than 6 months | 5% |
6 months - 1 year | 15% |
1 - 2 years | 20% |
2 - 3 years | 30% |
3 - 4 years | 40% |
4 - 5 years | 50% |
Over 5 years | Decided by insurer and vehicle owner as per market value |
Petrol and diesel cars depreciate at a fixed percentage, which is set by the IRDAI. Hence, as of now, the motor vehicle depreciation rate for both fossil fuel-based and electric cars is the same.
But, the main concern is the EV battery, which is the most important and costly part. The longevity of an EV battery (8-10 years) is much lower than that of a car's engine (about 10-15 years). However, it is typical of what you can expect from an electric car. Due to this, there are questions regarding the uniformity in the electric vehicle depreciation rate at present.
Moreover, electric car insurance prices can also differ. Third-party premiums for EVs are based on their battery capacity. But the comprehensive insurance price also includes Own Damage (OD) premiums, which may be higher for EVs due to expensive battery repair and replacement costs. Thus, EV owners should keep these factors in mind while choosing an electric car insurance policy.
Maybe in the future, the depreciation rate specific to EVs might be introduced by IRDAI for EVs once the EV market matures and depreciation data becomes available. But, till then, it remains the same as that of fuel-based vehicles.
Several factors affect the depreciation rate for vehicles. Let's take a look:
The vehicle depreciation rate directly influences car insurance premium amounts. The policy premium for vehicle insurance is calculated with the IDV, which is the maximum amount your car insurance company gives in case of total loss or theft of the insured four-wheeler.
Since a car's value decreases over time, so does its IDV. Thus, it results in a lower car insurance premium and smaller claim amount settlements. Moreover:
While the vehicle depreciation cannot be stopped, you can slow it by following these tips:
Depreciation is unavoidable — every vehicle loses value over time. But by understanding the car depreciation rate and choosing the right add-ons, you can lower its impact on both premiums and claim payouts with your car insurance. Whether you drive a petrol, diesel, or electric vehicle, knowing its depreciation rate can help you make smart choices when purchasing or renewing a four-wheeler insurance policy.
When you renew your car insurance policy, you may notice a
Read moreThe GST Council, in its 56th meeting, revised the Goods and
Read moreThe Indian government, as part of India's Ethanol Blended Petrol
Read moreEveryone buys car insurance, but very few people are aware of the
Read moreThe Insured Declared Value (IDV) is the highest sum a car
Read moreLosing your car insurance documents can be daunting, especially when you need them in an emergency or for a routine
Read moreA vehicle fitness certificate (FC) ensures that a motor vehicle is fit to be driven on roads. As per the Indian
Read moreBuying a car, even second-hand, is a big decision, and often, people overlook the essential documentation involved
Read more#Rs 2094/- per annum is the price for third-party motor insurance for private cars (non-commercial) of not more than 1000cc
*Savings are based on the comparison between the highest and the lowest premium for own damage cover (excluding add-on covers) provided by different insurance companies for the same vehicle with the same IDV and same NCB. Actual time for transaction may vary subject to additional data requirements and operational processes.
+Savings are based on the maximum discount on own damage premium as offered by our insurer partners.
^Lowest Price Guaranteed is based on certifications shared by insurers with us. Policybazaar will facilitate price matching subject to the terms and conditions of select insurers.
##Claim Assurance Program: Pick-up and drop facility available in 1400+ select network garages. On-ground workshop team available in select workshops. Repair warranty on parts at the sole discretion of insurance companies. Dedicated Claims Manager. 24x7 Claim Assistance.
Insurance
*Savings are based on the comparison between the highest and the lowest premium for own damage cover (excluding add-on covers) provided by different insurance companies for the same vehicle with the same IDV and same NCB. Actual time for transaction may vary subject to additional data requirements and operational processes.
Policybazaar Insurance Brokers Private Limited CIN: U74999HR2014PTC053454 Registered Office - Plot No.119, Sector - 44, Gurugram - 122001, Haryana Tel no. : 0124-4218302 Email ID: enquiry@policybazaar.com
Policybazaar is registered as a Composite Broker | Registration No. 742, Registration Code No. IRDA/ DB 797/ 19, Valid till 09/06/2027, License category- Composite Broker
Visitors are hereby informed that their information submitted on the website may be shared with insurers.Product information is authentic and solely based on the information received from the insurers.
BEWARE OF SPURIOUS PHONE CALLS AND FICTITIOUS / FRAUDULENT OFFERS IRDAI or its officials do not involve in activities like selling insurance policies, announcing bonus or investment of premiums. Public receiving such phone calls are requested to lodge a police complaint.
© Copyright 2008-2025 policybazaar.com. All Rights Reserved.