Mr. Law travelled to Frankfurt for two weeks. When he collected his luggage at the airport after he returned to Hong Kong, one of his bags was damaged. He immediately reported the damage to the airline company and requested compensation. The airline company admitted their negligence and compensated him HK$400, which was half of the original value of the luggage bought 3 years ago.

Mr. Law was unsatisfied because the airline company refused to compensate the original value of his luggage. He then filed a claim with his travel insurance company together with damage confirmation from the airline company.

After assessment, Mr. Law's travel insurance company paid HK$200 to him after deduction for depreciation and in consideration of the compensation already paid by the airline company. Mr. Law was not satisfied with this outcome and insisted that the compensation should be for the original value of his luggage.

Why was Mr. Law unable to claim the original value of his luggage from his travel insurance company?

As Mr. Law had already received HK$400 compensation from the airline company, his actual loss was only HK$400. Since Mr. Law's luggage was bought 3 years ago, his travel insurance company took depreciation into account when calculating the compensation. Therefore, Mr. Law was compensated HK$200 by his travel insurance company.

Some customers may assume insurance companies will compensate the original value of a damaged item. They should take note that travel insurance will compensate the market price of the item only when the item was bought less than a year before the claim. Betterment will also be deducted if an upgraded model of the damaged item was bought as a replacement.

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