Zero Depreciation in Car Insurance: Is It a Good Deal?

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So you bought a new car. Congratulations! You have probably put a lot of time and effort into buying your new car. However, buying a car insurance policy is also a significant step toward financially protecting your precious possessions. But does your car insurance cover the entire cost of the repairs for the damages to the car parts? Let's find out.

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      Understanding Depreciation in Car Insurance

      Depreciation refers to the loss of value of a vehicle over time due to age, wear and tear and obsolesces. If you purchase a new car for Rs 10 lakh, its value will decrease with every passing year.

      In case of an accident, the insurer will calculate the claim based on the depreciated value of the car parts. They will also have certain deductions and exemptions; in fine print that apply to the policy. Unfortunately, the insurer analysis the damage sustained by the insured car, and the value is excluded from the final claim amount that you will receive. To overcome this problem, the zero-dep on four-wheeler insurance comes to help you.

      What is Zero Depreciation Cover?

      A zero dep cover is an add-on cover (rider) that covers the depreciation applicable to the value of the insured vehicle. With it, the insurer does not subtract the depreciation value on different car parts while covering any claim amount. This cover is commonly known as the Bumper to Bumper cover and the Nil Depreciation cover.

      To get wide coverage, you should buy a zero-dep car insurance policy. Even you can opt for this cover during the car insurance renewal.

      Calculation of the Rate of Depreciation

      The Insurance Regulatory and Development Authority of India (IRDAI) has laid down some depreciation rates for insurance claim purposes. This applies to all car insurance companies across the country. The depreciation rates are as follows-

      Car Parts Rate of Depreciation
      Plastic parts, nylon parts, rubber parts, tyres & tubes 50%
      Paintwork 50%
      Glass and fibreglass components 30%
      Metallic parts 0-5%

      How is Zero Dep Cover Different from Comprehensive Car Insurance?

      In the case of a comprehensive insurance policy, the policyholder is reimbursed by the amount after a complex calculation taking into account the car depreciated value.

      On the other hand, with the Zero-Dep in car insurance, the policyholder will be reimbursed with the full amount of the repair cost regardless of the age and the car's current value.

      To give you a better insight, the below table highlights the difference between a comprehensive policy with zero dep cover and without it-

      Features Comprehensive Car Insurance With Zero-dep Add-on Cover Comprehensive Car Insurance Without Zero-dep Add-on Cover
      Claim Amount Get compensated without deducting the depreciation Depreciation will be applicable on the certain car parts
      Premium Slightly higher Comparatively lower
      Age of the car Up to 5 years Up to 15 years
      Own Expenses Less burden on the policyholder while settling claims The policyholder has to pay some of the expenses
      Coverage for Various Car Parts Maximum coverage Comparatively less

      Ideal Time to Purchase a Zero Depreciation Cover

      A zero-depreciation cover can help you save a lot of money for repairs and when replacing expensive car parts. This add-on cover is beneficial for the following cases-

      • Luxury cars and high-maintenance car owners must get this cover as the depreciation value of these parts would be even higher.
      • Those who reside in an accident-prone area where the car owner might bear high service costs should opt for this cover.
      • Those who worry about small dents & bumps and wish to keep their car in pristine condition should buy this cover.
      • New drivers, aged drivers, and young drivers who are unsure of their driving skills may end up needing repairs more than usual. Therefore, they must choose this car insurance add-on cover.
      • This type is ideal for a brand-new car as it will fully cover all damages to the car.

      You May Also Read: All About Zero Dep Insurance

      Final Thoughts

      Before buying zero dep add-on cover for your car, it is advised to take time and compare multiple plans offered by different insurers to make a knowledgeable decision. You can also visit the official website of Policybazaar Insurance Brokers Limited if you want a precise comparison. Looking at the advantages associated with this add-on cover, it will turn out to be a great investment for you!

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      #Rs 2094/- per annum is the price for third-party motor insurance for private cars (non-commercial) of not more than 1000cc

      *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. Actual time for transaction may vary subject to additional data requirements and operational processes.

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