Zero depreciation is a type of car insurance policy that provides complete coverage for the damage caused to the car in an accident excluding tyres and batteries. In a Zero depreciation car insurance, the depreciation factor is excluded from the coverage and the entire cost for the replacement of any body part of the car is provided to the policyholder.
This policy provides 100% coverage for any metal or fiber body part of the car except the engine damage because of oil leakage. The policy does not cover any mechanical breakdown and you can raise a limited number of claims in a year under this policy. It is recommended to the car owners to purchase this policy and it costs around 15-20% of the standard policy premium rates. Those who do not know what depreciation means, let us tell you.
When you purchase something, the value of that particular item or asset decreases day by day. This reduction in value is known as depreciation.
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.
There are several benefits of zero-depreciation cover. They are as follows:
While opting for a zero-depreciation car insurance policy, you should keep the following things in mind.
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.
|
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.
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.
Now that we have told you almost everything about the zero-depreciation add-on and how it works and how much more you can save in a year under this add-on, it is recommended by the insurance experts to purchase this policy in the initial years of purchasing the car. It is also advised that you purchase the insurance policy online as it is easier than purchasing the policy offline. You can compare different plans in one place and add-on riders as well as calculate the premium rates of your desired policy.
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*Savings are based on the comparison between the highest and the lowest premium for own damage cover (excluding add-on covers) provided by different insurance companies for the same vehicle with the same IDV and same NCB.
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