How Does a Zero Depreciation Car Insurance Policy Benefit You During Claims?
A zero depreciation policy ensures that a car insurance companyRead more
What is Zero Depreciation Car Insurance?
A zero depreciation cover is simply an add-on cover that covers the depreciation costs based on the age of the insured vehicle. It covers nylon, plastic, glass, and rubber parts at 100% costs, except for tyre, tube and battery costs that are covered at 50%.
To avoid the issue of depreciation, almost every car owner wisely prefers to avail a zero depreciation car insurance policy. You can also opt for zero dep cover during car insurance renewal.
Key Benefits of Zero Depreciation Insurance
The key benefits of a zero depreciation add-on are given below:
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Higher Claim Settlement Amount
The biggest advantage of this car insurance add-on is that you receive a better claim amount for replaced and repaired parts. Your claim amount will be higher in comparison to a standalone own damage policy or a comprehensive policy without this add-on.
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Reduces Out-of-the-Pocket Expenses
With this add-on, you only pay compulsory deductibles and exclusions, which reduces your financial burden. Without the zero dep policy, you will have to pay a significant amount while settling an accidental claim.
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Ideal for New and High-End Cars
This type of car insurance is ideal for new and high-end cars as they have expensive parts. It helps in replacing or repairing damaged items at a minimal amount.
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Better Financial Decision
Even though the add-on is available at a nominal cost and increases your premium, it significantly reduces your financial burden in case of any unforeseen situation. It is a financially safe decision to purchase it with your motor insurance.
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Useful for Frequent Drivers
If you drive daily or in heavy traffic areas, the likelihood of minor damages is higher, especially in metropolitan cities. Zero-dep insurance ensures small accidents do not result in major financial strain and help during claims.
The Role of Zero Depreciation Insurance in Car Insurance Claims
Suppose your car gets damaged in an accident and the total repair cost comes to ₹20,000. Under a standard own-damage or comprehensive insurance, the insurer first applies depreciation on the damaged parts before settling the claim. If the depreciation deduction is ₹6,000, the insurer will pay only ₹14,000, and you must bear the remaining ₹6,000 from your own pocket.
Now, if you have a Zero Depreciation add-on, the insurer does not deduct depreciation on replaced parts. In this case, the insurer pays the full ₹20,000 repair cost (except compulsory deductibles, if any), and your out-of-pocket expense becomes minimal or zero.
| Components |
Without Zero-Dep Cover |
With Zero-Dep Cover |
| Repair bill |
₹20,000 |
₹20,000 |
| Depreciation deduction |
₹6,000 |
₹0 |
| Amount insurer pays |
₹14,000 |
₹20,000 |
| Your cost |
₹6,000 |
₹0 |
Key Limitations of a Zero Depreciation Insurance
Here are some limitations of a zero depreciation cover:
- Insurers usually offer zero depreciation cover only for new or relatively new cars. Your car must be eligible to buy this add-on.
- Most car insurance companies limit the number of zero-dep claims you can make in a policy year, such as two or three claims.
- The add-on increases your premium because the insurer agrees to pay settle accidental claims without deducting depreciation. Hence, it may not be suitable for budget conscious owners.
- Zero depreciation does not cover all types of damages, such as normal wear and tear, or damages incurred when the driver is intoxicated, mechanical or electrical breakdowns. It only removes depreciation deductions on replaced parts.
- Mechanical breakdowns, regular wear and tear, and exclusions listed in the base policy remain uncovered unless you buy additional add-ons.
Calculation of the Rate of Depreciation
The Insurance Regulatory and Development Authority of India (IRDAI) has designed a specific rate chart for determining the depreciation value.
- For plastic, nylon, and rubber parts: 50% depreciation is to be deducted
- For fibreglass components: 30% depreciation is deducted
- For wooden and metallic parts: Depreciation is subtracted as per the age of the car For a 1st year: 5%, for 2nd year: 10% and so on
Therefore, depending on the age of your car, the insurer calculates the depreciation value.
Is Zero Depreciation Cover Worth It?
Yes, zero depreciation cover is absolutely worth it due to its advantages. Though the premium will slightly increase in comparison to a standard comprehensive policy, it will still turn out to be a great investment as it will save a significant money when you file an accidental claim. Instead of paying a large amount out of your pocket, it is better to pay a little higher premium and forget about these costs.
Zero depreciation add-on cover will also help you get a better value of your vehicle when it is severely damaged or stolen. Hence, it is a wise decision to invest in a zero depreciation add-on cover.
Factors Affecting the Zero-Dep Premium
Apart from the IDV, there are some other factors that greatly affect the premium of this add-on cover. These are:
- Age of Car: Older the car, the higher the car premium. Most insurers don't offer zero depreciation cover for cars older than five years, while some have even restricted it up to three years. However, a few insurers have also started offering a 7-year zero dep cover.
- Model of the Car: Some car models are not covered by a Nil depreciation policy. Thus, you must consult with your insurer/agent before buying this add-on cover.
- Location: If you live in an accident-prone area, the premium for a zero-depreciation policy will be higher.
Who Needs to Buy Zero Depreciation Add-on Cover?
Zero Depreciation cover is highly recommended for new cars. But, there are some other cases where a zero-dep rider is indispensable:
- People who own luxurious cars should buy a zero-depreciation plan to avoid the high maintenance costs, as the cost of spare parts and depreciation rates for such cars are higher.
- New drivers who are not well-acquainted with driving should opt for zero-dep cover, as their chances of an accident are higher. To reduce the financial stress after accidents, a zero depreciation cover is a must for new drivers.
- People who live in accident-prone areas should also consider this add-on cover. With this add-on cover, they can easily cover their damages without any worries.
- If you worry about dents and bumps on your car and want to keep it in pristine condition, you should buy a zero-depreciation add-on cover.
Wrapping Up!
Zero depreciation add-on cover comes with multiple benefits that can help you save a lot during claims. It is beneficial to get a better claim amount, exclude depreciation costs Thus, check and compare car insurance online to grab the best deal on the zero depreciation rider. Also, do not forget to renew your policy on time.
