What is Covered Under Zero-Depreciation Car Insurance Policy?
Depreciation in car insurance refers to the loss in value of the car over time due to various
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What is Zero Depreciation Car Insurance?
Zero depreciation, or bumper-to-bumper insurance, is a car insurance plan that provides you with complete protection without considering the depreciation of your vehicle or its parts. Normally, if you raise a claim following an accident, the insurer deducts the depreciation value of damaged parts of your car before paying you. However, with a zero depreciation add-on in car insurance, you get the entire expense amount of replacing damaged items, such as rubber, metal, & plastics, without any deductions.
The bumper to bumper insurance is particularly beneficial for brand-new or luxury cars, since their repairs are expensive to carry out. Although zero depreciation car insurance is costlier than a standard motor policy, it can help you save significantly in the long run by covering the entire repair costs.
Here is an Example
When you purchase a brand new car at Rs. 5 lakh. The value of the car starts reducing as soon as you take the delivery and get it out of the showroom. Then in one year, the value of the car will depend on its condition and how many kilometers it has been driven.
Benefits of Zero Depreciation Add-on in Car Insurance
There are several benefits of a zero depreciation car insurance policy. Have a look:
- Provides financial coverage for any damage or loss caused by an accident.
- It enhances your standard car insurance and reduces the cost of damaged body parts to zero.
- It takes care of the expenses incurred as a result of the insured car's depreciated value as per the current market value.
- The depreciated value is not considered when providing cover for the incurred expenses after repairing or replacing the damaged part of the car.
Things to Keep in Mind While Opting for Zero-Depreciation Car Insurance
While opting for a zero-depreciation car insurance policy, you should keep the following things in mind.
- Zero-depreciation car insurance is an Add-on cover.
- Your car should not be older than 3 years otherwise you won't be eligible enough to opt for this cover.
- This cover provides better coverage than the standard car insurance plan therefore the premium rates of this cover are higher than the standard ones.
- It is recommended to the people who own luxury cars or the ones who live in safe and low-risk locations.
- You can only get cover for some specific cases and do not cover for minor damages like dents.
- Fifty percent depreciation will be deducted on batteries as well as the parts that are made of nylon, plastic, and rubber.
- 30% depreciation will be deducted for the parts made of fiber.
- For wooden parts of the car, the depreciation deduction is analyzed by the age of cars.
- For wooden parts of the car, the deductible value for depreciation is 5% for one year, 10% in 2 years, 15% in 3 years, and so on.
How Zero-Depreciation Works during Claim Settlement?
When you raise a claim with a standard car insurance policy, the insurer only pays for the depreciated amount of the replaced car parts. A standard insurance policy can make you pay a high amount if your car is new.
Difference between Zero Depreciation Cover & Standard Cover
| Standard Cover |
Zero-depreciation Cover |
| Premium Rates |
Low |
High |
| Cost of Repairing & Fiber-Plastic |
The policyholder has to pay more |
The insurer bears the maximum amount |
| Claim |
The claim amount depends on the current value of the car that depreciates the coverage amount |
Without Considering the depreciated amount the coverage is settled. |
| Age of Car |
Provide coverage for a car less than fifteen years |
Provides coverage for new cars up to five years |
Some of the insurance providers do offer zero-depreciation cover for cars older than 5 years as well. It varied from company to company.
Here is An Example
Let us give you an example of how much you will have to pay for the damaged parts and its depreciation. Assuming your car is worth Rs. 15,00,000.
| Car Body Parts |
Damage Cost (Rs.) |
Depreciation Cost (Rs.) |
Amount with Zero-depreciation (Rs.) |
| Windscreen |
4000 |
0 |
0 |
| Fiberglass |
6000 |
1200 |
0.6 |
| Plastic parts |
16,000 |
8000 |
1 |
| Metal Parts |
12,000 |
650 |
0.1 |
| Labour |
6000 |
0 |
0 |
| Total |
44,000 |
9,850 |
1.7 |
*Disclaimer: The above mentioned figures are assumed as the actual cost will depend upon the severity of damage caused to the car and how much depreciation cost is applied by the insurer.
So, under a standard car insurance policy, you will have to pay Rs. 9,850 but under zero- depreciation:
| Premium & Claim Cost |
With Zero-depreciation (Rs.) |
Without Zero-depreciation (Rs.) |
| Basic Plan Premium Rate(A) |
17,000 |
17,000 |
| Zero-Depreciation Add-on (B) |
3,000 |
0 |
| Total Cost of Plan (C) A+B |
20,000 |
17,000 |
| Deductible per claim* (D) |
4000 |
4000 |
| Repairing Cost (E) |
35,000 |
35,000 |
| Payable Amount (F) |
0 |
9,850 |
| Total Expense in a Year (G) (A+D+F) |
17,000+ 4,000+0= 21,000 |
17,000+4000+9850= 30,850 |
| Saved (E-G) |
35,000-21,000= 14,000 |
35,000-30,850= 4,150 |
*Disclaimer: The above mentioned figures are assumed as the actual cost will depend upon the severity of damage caused to the car and how much depreciation cost is applied by the insurer.
This is the amount you can save under zero-depreciation policy when you raise the claim once a year.
Conclusion
Now that you know almost everything about the zero-depreciation add-on in car insurance, how it works, and how much you can save with this add-on in case of a claim, it is recommended that you consider opting for this add-on when purchasing four-wheeler insurance for your car. It is also advised that you buy car insurance online since it is hassle-free, takes a few minutes, lets you compare different plans in one place, and also allow you to calculate the premium rates of your desired policy.
