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Contract trap · Insurance

Payout shrunk by depreciation

Pays the depreciated value (ACV, 'с учётом износа', roof-age schedules, 'betterment', monthly-declining sums insured) rather than replacement cost; the insurer chooses repair vs cash, uses its own repairer network and 'like kind and quality' aftermarket parts, pays only its network price if you use your own garage; on a write-off pays its own 'market value' at a 65-75% constructive-total-loss threshold, deducts salvage valued via an auction bid, prior damage, unpaid instalments and the franchise.

Severity
Severe
How often it turns up
Common
Holds up?
Usually enforceable
Clause phrases
24

What it looks like in a contract

Redline matches these phrases against your document verbatim. Drafters rarely invent new wording — they copy it, which is why the same sentences turn up across unrelated contracts.

In English-language contracts

  • actual cash value
  • less depreciation
  • recoverable depreciation
  • roof surface payment schedule
  • betterment
  • at our option, repair, replace or pay
  • approved repairer
  • like kind and quality
  • if you choose not to use our approved repairer we will pay the amount it would have cost us
  • market value immediately before the loss
  • constructive total loss
  • we will deduct the salvage value

In Russian-language contracts

  • с учётом износа
  • амортизационный износ
  • нормы износа
  • страховая сумма уменьшается на
  • за первый год эксплуатации — 20%
  • не может превышать 50 процентов
  • утрата товарной стоимости не возмещается
  • ремонт на СТОА по направлению страховщика
  • использование неоригинальных запасных частей (аналогов)
  • выплата на основании калькуляции страховщика
  • полная (конструктивная) гибель
  • стоимость годных остатков определяется по результатам аукциона

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Why it bites

A 15-year-old roof pays 30-40% of replacement; ОСАГО cash payouts run 30-50% below real repair cost and КАСКО «нормы износа» cut a first-year total-loss payment by 15-20%; dealer warranty is voided by non-dealer repairs and repairs drag on for months; financed-car owners owe more than the payout.

Is it enforceable where you are

The same clause can be routine in one country and void in another. What follows is what the law says where you are — not advice on your particular contract.

In the UK, the Insurance Act 2015 and Consumer Insurance (Disclosure and Representations) Act 2012 restrict what an insurer may avoid; in the EU, the IDD and Directive 93/13 apply, and in the US, insurance is regulated state by state.

United States

ACV lawful and common; states split on depreciating labour and some have 'matching' statutes; roof schedules must be disclosed; most states require aftermarket-parts disclosure and protect the consumer's choice of shop (anti-steering); total-loss thresholds and valuation reports regulated by state; NAIC Model 900 §4 treats lowball offers and unworkmanlike required repairs as unfair.

  • Cited
  • NAIC Model 900 §4

European Union

Permitted (Zeitwert vs Neuwert) if transparent; Germany VVG §88 defaults to replacement value; referral to a cheaper independent workshop only if equivalent and reasonably accessible (BGH 'freie Werkstatt'); settlement at Wiederbeschaffungswert with salvage at realisable value.

  • Cited
  • VVG §88

United Kingdom

'New for old' is the market norm for contents, cheaper 'indemnity' policies must be flagged; motor total loss at market value from trade guides, which FOS checks and often increases; FOS expects timely repairs and courtesy cars as promised; FCA paused GAP sales in Feb 2024 over fair value.

  • Cited
  • FCA

Russia

Depreciation allowed where agreed (п. 36 Пленума ВС № 20/2013); ОСАГО cash settlement under the Единая методика with parts wear capped at 50% (п. 19 ст. 12 40-ФЗ; п. 42 Пленума ВС № 31/2022) but repair must be without wear (п. 15.1) within 30 working days; УТС recoverable under ОСАГО (п. 40 Пленума № 31) but a voluntary policy may exclude it (п. 48 Пленума № 19/2024); repair in kind allowed for КАСКО (п. 4 ст. 10 Закона 4015-1) and if the СТОА misses the deadline the insured may claim money; п. 5 ст. 10 — abandonment for the full sum insured; п. 46-47 Пленума № 19 — salvage cannot be valued by an arbitrary top auction bid.

  • Cited
  • 40-ФЗ
  • Пленума ВС № 20/2013
  • Пленума ВС № 31/2022
  • ст. 10
  • ст. 12

Where this has actually happened

Regulator actions, court rulings and the contracts they were fought over.

  • Russian OSAGO law (40-ФЗ) art. 12(19): parts depreciation in cash settlements capped at 50% — restated in Supreme Court Plenum No. 31 (8 Nov 2022) para 42
  • Supreme Court of Russia Plenum No. 19 (25 June 2024) paras 46-48: full sum insured on abandonment of salvage; salvage not by arbitrary auction bid; УТС may be excluded by a voluntary policy
  • NAIC Unfair Claims Settlement Practices Model Act (#900) §4: unfair to compel suits 'by offering substantially less than the amounts ultimately recovered'

What to do

In order, from the thing that takes a minute to the thing that takes a letter.

  1. Buy replacement-cost / «без учёта износа» / «без уменьшения страховой суммы» cover, GAP and an OEM-parts / «официальный дилер» endorsement
  2. Get the settlement option in writing and an independent estimate
  3. After a loss complete repairs and claim the withheld depreciation
  4. RU: under ОСАГО insist on repair without wear (п. 15.1 ст. 12 40-ФЗ) within 30 working days or cash without wear plus неустойка (Пленум ВС № 31/2022), and on total loss abandon the salvage to receive the full sum insured (п. 5 ст. 10 Закона 4015-1
  5. П. 46-47 Пленума ВС № 19/2024).

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Traps that travel with it

Drafters who use one of these usually use several.

79 traps · 1789 verbatim clause phrases