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Date : Sep 24, 2008

Question

Sir, Please help me in understanding how the value of the belongings is assessed with an example. For e.g I bought my AC for 28,000 and is 1 year old, what is the amount that I need to insure my AC for? Thank you Sridhar M

Answer

The amount of insurance required for any house hold product is equal to its depreciated value. Depreciation means the reduction in the value on account of wear and tear, depreciation is charged every year based on certain predefined percentage.


For example, the price of your AC when you bought was Rs. 28000, suppose the depreciation will be charged at the rate of 20% per year. After one year the depreciated value of your AC will be 22400 (28000-5600). 5600 is the depreciation charged for the first year at the rate of 20%.

The rate of depreciation could be different for different years, you can check the depreciation schedule in your House hold insurance policy document.

 

 

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