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

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 7-10 years old. Let us tell you more about this cover and its importance for a 7 years old car 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.

Almost all motor insurance providers offer zero depreciation cover for cars up to 5 years old. However, zero depreciation cover for 7-year-old cars and up to 10 years is also offered by a many insurers now.

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 car insurance for 7 years covers the rate of depreciation on a car of 7 years old when you register a car insurance 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 or after that, the percentage of depreciation applicable when you make a claim will be 40% and so on.

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

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 or after 7 years, 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.

Should I Buy 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 with car insurance:

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 dep 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 plan with zero depreciation cover for a 7-year-old car.