FAQs

What is a No Claim Bonus/Discount (NCB/NCD)?

A No Claim Bonus (NCB) or Discount (NCD) is a discount or bonus given to policyholders on their renewal premiums for the next year if they did not receive a claim for an accident in the previous year.

If there is a claim during the policy period,

private car

If a claim is made during a policy period with a no-claim discount of 40% or less; or if more than one claim is made in a year, the no-claim discount will be forfeited in its entirety.
If a claim is made once during the policy period with a 50% no-claim discount, the no-claim discount will be reduced to 20% at the next renewal.
If a claim is made once during the policy period with a 60% no-claim discount, the no-claim discount will be reduced to 30% at the next renewal.

Commercial Vehicles/Motorcycles

If a claim is made during the policy period, the no-claim discount shall be completely cancelled.

What is Excess?

Excess is the amount a car owner is responsible for when making a car insurance claim with their insurance company in the event of an accident. The excess depends on the type of claim and the type of driver at the time of the accident.

The details of each type of excess are as follows:

General Excess: Applicable to comprehensive insurance (full coverage) for loss or damage to the insured vehicle caused by an accident. The owner must pay this excess when making a car insurance claim.

Theft Loss Excess: Applicable to comprehensive insurance (full coverage) in the event that the insured vehicle is unfortunately stolen, the car owner must pay this excess when making a car insurance claim.

Parking Damage Excess: This deductible applies to all claims under comprehensive insurance (full coverage) for damage to the insured vehicle caused by an accident while the insured vehicle is unattended or parked. This deductible is calculated in addition to the parking damage deductible.

Third Party Property Damage Excess: Applicable to comprehensive insurance (full coverage) and third party property damage (triple coverage).

In case of death or property damage to a third party caused by the driver's negligence, the vehicle owner will be required to pay the amount of excess when filing a motor insurance claim.

Unnamed Driver Excess: Applicable to comprehensive insurance (full coverage) and third-party property damage (TPO). The driver of the insured vehicle is not named in the policy. In case of claim, the excess will be included along with other excess such as general excess and TPPD excess.

What is depreciation? How do I calculate the rate of depreciation?

What does depreciation on my vehicle mean?

Depreciation is the decline in a car's value over the course of its useful life. Certain parts on your vehicle have a "life expectancy" so the value of the part being repaired is currently less than the new replacement part. Insurance companies in Hong Kong normally take this into consideration.

Once the insurance company repairs the vehicle, they state that they are reinstating it to a better condition than before the accident; this approach is accepted practice in the Hong Kong legal system. To account for this improved condition, there needs to be a depreciation adjustment.

For example, Motor Vehicle Insurance companies in Hong Kong will include policy terms stating that they are not liable for the following clauses in the event of Vehicle Own-Damage:

depreciation (betterment), wear and tear, mechanical or electrical breakdown, failure or breakage;

damage to tyres unless damage is caused to other parts of the vehicle at the same time; and

any excess applicable in the accident.

The amount of depreciation and/or betterment will be assessed by the insurance company’s appointed surveyor on any part of the vehicle for the costs of repairing or replacement.

An example of depreciation:

A five year old vehicle was partially damaged in an accident. The agreed repair cost was determined to be $50,000 by the garage and the insurance company’s appointed surveyor. The amount of depreciation was assessed to be 30% on the price of the replaced parts or $15,000. The $15,000 depreciation was based on the vehicle’s age (five years old), its condition (some wear and tear) and the mileage. The claim payment is the agreed repair amount $50,000, less the depreciation $15,000, less all applicable excesses.

How often does it occur? When does it apply?

There is no standard rate for vehicle depreciation and many insurance companies will calculate the depreciated value of your car differently. A typical example of depreciation for a brand new vehicle can be seen below:

1 year after purchase: -20 to 30% of original value
2 years after purchase: -25 to 40% of original value
3 years after purchase: -30 to 50% of original value
4 years after purchase: -35 to 60% of original value
5 years after purchase: -40 to 70% of original value
6 years after purchase: -45 to 80% of original value

Depreciation on a vehicle will slow down 6 - 7 years after the original purchase and from this point the vehicle will continue to retain approximately 20 - 30% of the original value. The amount of depreciation applied will depend on the age and pre-accident condition of the vehicle, as well as the mileage.

If your vehicle is less than one year old then it may not be subject to depreciation in the event of a total loss. Some motor policies have ‘new for old’ cover if a vehicle is less than one year old and the claim is a total loss. However, depreciation is normally applied in partial loss/damage situations by the motor vehicle insurance companies regardless of the age.

How can I protect myself from depreciation cost?

By keeping your vehicle in the best possible condition. However, doing this will not protect you from all depreciation charges.
You can allow your car to be repaired with second hand parts of a similar age and condition. Unfortunately these are not always available.
You can fully protect yourself by adding a depreciation protection on to your car insurance policy. Then there will be no depreciation adjustment to your vehicle’s repair quote in case of a partial loss/damage.