Depreciation is a reduction in an asset's value to reflect factors such as age, use, wear, and obsolescence. Insurers may apply it when settling losses on an indemnity basis or to specified replacement parts. Accounting depreciation and a policy's claims depreciation formula are not necessarily identical.
For damaged equipment in Nepal, the price of a brand-new replacement may exceed the payable value of the older asset. Check whether replacement cost protection changes that treatment and whether specific parts remain subject to deductions. Purchase dates, maintenance records, and photographs can help establish age and condition.