How to avoid depreciation on lost or stolen items

TID covers luggage and personal effects you take away with you or buy along the way for permanent loss, theft and accidental damage.

If you have to make a claim, what we pay does not cover you to replace your item with a brand new one, as we depreciate for age and wear. Depreciation applies to everything you take with you including clothing, luggage and higher value items like iPads, mobile phones, laptops and cameras.


How to avoid depreciation

You can avoid depreciation on items listed on your policy by specifically adding them as valuable items when you buy your policy. Simply get a quote and look for this panel on the options page:


Depreciation calculation

We use international insurance standards to determine depreciation. Depreciation will apply each year starting from the time of purchase until the date of loss. Different rates of depreciation will apply depending on the type of item, age of the item, the condition of the item at the time of loss and the asset life of the item.

Asset life is the number of years of service expected from an item. The Australian Taxation Office uses the term ‘effective life’. We determine the asset life of items contained within your luggage and personal effects and from this we can apply the rate of depreciation.

If the item is older than the asset life, the residual value of 25% of the purchase price of the item would 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.

The following are some examples you can use as a guide:

Example 1

Your iPad2 was purchased for $800 12 months ago and was stolen. 

  • The asset life is 3 years with a residual value of 25%.
  • The depreciation rate is calculated per annum over 3 years, 75% ÷ 3 = 25%. Therefore, the depreciation applied would be 25% per year.  
  • The calculation is: $800 – 25% = $600 will be the benefit paid (less excess if applicable);

Example 2

You lose a pair of sunglasses purchased for $400 2.5 years ago.

  • The asset life of sunglasses is 5 years.
  • The depreciation rate is calculated per annum over 5 years, 75% ÷ 5 = 15%. Therefore, the depreciation applied would be      15% per year plus 7.5% for 6 months (37.5%).
  • The calculation is: $400 – 37.5% = $250 will be the benefit paid (less excess if applicable).

Common items

To assist you in calculating the depreciation that may apply to your luggage and personal effects, we’ve provided the asset life of common items that our customers claim on:

  • Mobile phones, laptops, tablets – 3 years;
  • Clothing – 3 years;
  • Sports equipment eg, surfboards, ski equipment – 4 years;
  • Cameras and video cameras – 7 years;
  • Jewellery – 10 years.

The depreciation rates and asset life values are applicable to these scenarios and are subject to change without notice.


Proof of ownership

Where you do not provide proof of purchase or ownership, your item may be depreciated by a maximum of 75% even if it is specified and you have paid an additional premium.

The maximum amount you can allocate to a valuable item is its original purchase price. You must provide proof of the original purchase price if you claim; otherwise, we have the right to adjust the amount that we pay you. If you cannot provide the approved proof of ownership, we may decline your claim altogether.

This article was written by Travel Insurance Direct.
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