What is Depreciation?
Depreciation, in the travel insurance world refers to the amount your luggage and personal belongings are worth, after the insurance provider has applied a depreciation value.
This decrease in value is based on the age, type, wear and tear of the item and is determined by the insurance provider when you make a claim.
What does depreciation apply to?
Depreciation applies to everything you take on holiday with you including high value items such as jewellery, mp3 players, e-readers, mobile phones, tablets, laptops, cameras and video cameras etc..
Insurance providers can either chose to replace items (New for old) or to repair them, offer a store credit note, or make a cash payment. They will never pay out more than the original price of the item. Each insurance company varies so make sure you read the fine print in the product disclosure statement (pds) to ensure you are covered.
How to avoid depreciation
Most travel insurance companies remove depreciation when you increase your ‘single item limit’ by paying an additional premium which protects your more expensive items. Again, we encourage you to always read the fine print to see what each different insurer covers.
How do insurers determine depreciation?
Depreciation is calculated by the value of the items at time of claim, rather than time of purchase. The majority of insurance providers state that they will apply a ‘reasonable rate’ of depreciation within their pds’s. But it’s pretty obvious that the older your item is, the more depreciation will be applied.
Insurance providers use international insurance standards and what they call the items “asset life” to determine the amount of depreciation, which is the number of years of service expected from an item.
Depreciation will apply each year starting from the time of purchase until the date of loss.
The asset life of common travel gadgets
- Mobile phones, laptops, tablets – 3 years
- Clothing – 3 years
- Sports equipment e.g., surfboards, ski equipment – 4 years
- Cameras and video cameras – 7 years
- Jewellery – 10 years
If the item is older than the asset life, the residual value of 25% of the purchase price of the item will apply. For example, the asset life of an iPod is 3 years; if a claim is made for an iPod that is 4 years old, then the residual value of 25% will apply and you would be paid 25% of the purchase price.
What you won’t be covered for
Here at Compare Travel Insurance we want to ensure that you are armed with all you need to know to make a successful claim without nasty surprises. There are some instances where insurers just will not pay out. Here are a few common situations and things for you to bear in mind:
- Your belongings are not covered if you leave them unattended. This also includes if they are out of your reach
- You are not covered if they do not report the loss or theft within 24 hours to the police or place where the item was lost. This must include a full written report
- Some insurance companies will not pay any claim relating to a mobile phone (or device with phone capabilities) if you are unable to supply the IMEI (International Mobile Equipment Identity)
- You are not covered if you cannot prove the device belongs to you with an original receipt. Photocopied, faxed or scanned documents will not be accepted. Without this the insurance company may depreciate your item by 75%
- Some insurance companies will not pay if mobile phones, computer equipment, or jewellery is left unattended in a motor vehicle at any time
- You are not covered if driving a vehicle you are not licensed to drive e.g. motorcycle in Thailand
Start comparing the different insurance providers now and see how much cover they provide for luggage and personal belongings.