Why Buy Zero Depreciation Cover For 7-Year-Old Car?

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As a car ages, it becomes more susceptible to wear and tear, leading to depreciation. Although this depreciation is not covered under standard car insurance, you can additionally purchase a zero depreciation add-on cover for cars up to 7 years old. Let us tell you more about this cover and its importance further in the article.

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      What is a Zero Depreciation Cover?

      A zero depreciation cover is an add-on that can be purchased to cover the depreciation borne by the insured car over the years. By purchasing this add-on at an additional premium, you don't have to pay for the amount of depreciation from your pocket at the time of claim.

      Most motor insurance providers offer zero depreciation cover for cars up to 5 years old. However, zero depreciation cover for 7-year-old cars is also offered by a couple of insurance providers.

      Under a 7-year zero dep cover, the insurance company will cover the amount of depreciation incurred by the insured car for up to 7 years of age. The insurer will compensate you for the amount of depreciation deducted from the value of the car parts to be replaced or repaired at the time of claim settlement.

      In other words, zero dep cover after 7 years covers the rate of depreciation on a car of more than 7 years old when you register a claim.

      How is the Rate of Depreciation Calculated for a Car?

      When you purchase a zero depreciation cover for your four-wheeler, the insurer determines the depreciation rate based on the specific rates set by the Insurance Regulatory and Development Authority of India (IRDAI).

      For instance, the depreciation percentage for cars aged 5 to 10 years old will be 40%. Thus, if you purchase zero dep cover for a 7-year-old car, the percentage of depreciation applicable when you make a claim will be 40%.

      Here is a table stating the rate of depreciation based on the age of the car:

      Age of the vehicle: Rate of depreciation:
      Below 6 months Nil
      Between 6 months and 1 year 5%
      Between 1- 2 years 10%
      Between 2- 3 years 15%
      Between 3- 4 years 25%
      Between 4- 5 years 35%
      Between 5 - 10 years 40%
      Above 10 years 50%

      What is Excluded Under 7-Year Zero Dep Cover?

      Depreciation on all body parts of the car is not covered under a zero depreciation cover. There are some exclusions as well. Regular wear and tear due to mechanical breakdown are not covered.

      Replacement of tyres, consumables and unused parts are also not covered. Damages arising due to nuclear and warlike perils are also excluded. Moreover, total loss or theft of vehicles is also not covered under zero depreciation cover for 7-year-old cars.

      Which Factors Affect the Zero Depreciation Premium of a Car?

      If you are planning to purchase a zero depreciation cover after 5 years of your car, you must be aware of the factors affecting its premium so that you can make an informed decision. These factors are:

      1. Age of the Car: Your car's age is a major deciding factor of zero depreciation premium. For example, if your vehicle is 7 years old, you will have to pay a higher premium. Thus, the older the car, the more premium it will be.
      2. Model of the Car: Some specific car models are also not covered under the 7-year zero depreciation cover. Therefore, make sure to consult your insurance company before purchasing this cover.
      3. Your Location: The location in which you are based also affects the premium of the zero depreciation cover. For instance, if you live in an accident-prone area, the premium you will pay for this cover will increase.

      Can I get Zero Depreciation Car Insurance After 7 Years?

      At present, two motor insurance companies in India offer zero depreciation cover for 7-year-old cars. Royal Sundaram General Insurance Company and Edelweiss General Insurance Company provide zero dep cover for 7-year-old cars with car insurance.

      Royal Sundaram car insurance offers zero depreciation cover for cars that are not older than 10 years. On the other hand, the Zuno car insurance policy offers zero depreciation add-ons for cars less than 7 years old.

      Most of the other insurance companies do not offer zero dep insurance after 5 years. Moreover, cars older than 7 years old are excluded from the zero depreciation cover by most insurance companies. To know if zero depreciation cover for 7-year-old cars is offered by your insurance company, you can check the insurer’s policy wording before purchasing the add-on.

      Should I Buy a Zero Depreciation Car Insurance for 7 Years?

      Being an add-on cover, it's completely up to you to purchase a zero depreciation cover or not. But here are some reasons why you should buy zero dep cover for 7 years:

      1. If you are a new car owner, you should purchase this add-on, as the value of a new car depreciates very quickly as it ages. This can lead to significant expenses during a claim, which you can avoid by purchasing a zero depreciation cover.
      2. When you purchase a luxury car, the cost of repairing its parts is generally high, resulting in huge expenses during the claim process. Thus, if you want to avoid paying more from your pockets, you can purchase a zero depreciation add-on to cover the depreciation of these parts.
      3. You can also purchase a zero depreciation cover if you are a new driver. A new driver is more likely to meet a road accident resulting in the replacement of the parts of the car. To cover the depreciation amount on such a replacement, a zero depreciation cover would be an apt purchase.

      Wrapping Up!

      Depreciation is unavoidable as there will always be gradual wear and tear due to your car's regular driving and ageing. However, you can cover the depreciation borne by your car by purchasing a zero dep cover for 7 years. Remember to compare car insurance policy to buy the best plan with zero depreciation cover for a 7-year-old car.

      FAQs

      • Q1. Can I buy zero depreciation cover for old car?

        Ans: Yes, you can purchase a nil depreciation add-on for an old car as well. Old vehicles tend to depreciate over time, which can lead to paying heavy out-of-pocket expenses. Thus, to cover such depreciation incurred by your old car, opting for a zero depreciation add-on can be the best option.
      • Q2. What is the difference between zero depreciation and own damage?

        Ans: A Standalone own damage car insurance policy aims to compensate a policyholder in case his/her car meets with an unforeseen incident. These incidents include collisions, road accidents, natural calamities, theft, fire, etc. This policy can be purchased along with a third-party plan.
        On the other hand, a zero depreciation cover is an add-on that can be purchased with a standard car insurance policy. This add-on compensates a policyholder for the amount of depreciation sustained by the insured car. Thus, you won’t have to pay anything from your pocket.
      • Q3. Is tyre covered under zero depreciation insurance?

        Ans: Standard depreciation to tyre and tube parts is covered up to 50% under a zero depreciation add-on. So, you will be required to pay the rest 50% of the depreciation sustained by the tyres to the insurer.
      • Q4. Can I get bumper-to-bumper insurance after 5 years?

        Ans: Yes. There are some insurance providers in India who offer zero depreciation coverage for cars from 5 years to up to 7 years.

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