Insurance Glossary

Depreciation

Last reviewed 25 July 2026 · by the Savvy Insurance editorial team

What is depreciation?

Depreciation is the reduction in an item's value as it ages and wears. It affects market-value payouts and is why 'new-for-old' replacement cover can be more valuable.

Example

Because of depreciation, the market-value payout was less than he'd paid for the car.

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