Zero Depreciation Cover in Commercial Vehicle Insurance

Depreciation in general refers to the value loss of an asset with time because of factors like wear and tear, age, and obsolescence. So, in the same way, vehicles also depreciate with time. For instance, the value of a new car is more than an older car. In the same way, there is some amount of depreciation associated with almost all the materials the vehicle is made of like glass, metal, plastic, etc. However, the rate of depreciation of each material is different.

In case of an accident, if your commercial vehicle is damaged, you may not be able to get the entire expense incurred for the replacement of its parts. Most of the commercial vehicle insurance cover pays for the replaced parts of the vehicle after deducting the amount of depreciation. So, in such a case, the policyholder has to pay the difference between the market value of the replaced new part and the depreciated part of the vehicle.

Therefore, it is always good to opt for a zero-depreciation cover for your commercial vehicle. The zero-depreciation cover you get the maximum reimbursement at the time of claim and hence get the most from your commercial vehicle insurance cover.

What is Zero Depreciation Commercial Vehicle Insurance Cover?

Zero-depreciation commercial vehicle insurance helps to protect your commercial vehicle against various physical damages without factoring in the element of depreciation. Even though a standard commercial vehicle insurance policy provides coverage against various losses that arise when your vehicle gets stolen or damaged. However, when you file a claim, the compensation that you get is after deducting standard depreciation.

On the other hand, a vehicle insurance policy with zero depreciation cover may fetch you the complete amount of compensation. You can avail of zero depreciation cover for your brand-new commercial vehicle or add it while renewing the policy.

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In zero depreciation insurance cover for the commercial vehicle, the insurance provider pays the entire amount of claim without considering any depreciation on the value of your vehicle. Though you have to pay slightly more premium, this rider feature is largely recommended by experts in the motor insurance industry.

Advantages of Zero Depreciation Cover for Commercial Vehicles

The benefits/ advantages of having a zero-depreciation insurance cover are as follows:

  • Most of the commercial vehicle claims related to the insured parts are easily settled without considering the depreciation amount.
  • This add-on cover helps you to cut-down your out-of-pocket expenses as the cost of depreciation is not taken into consideration at the time of claim filing for settlement.
  • This is cover adds value to your basic commercial vehicle insurance cover and ensures you do not have to pay anything in case of damage or loss to your commercial vehicle.

With this insurance cover, you can be at full peace of mind. In addition to this, almost all the major insurance providers are offering zero-depreciation cover for commercial vehicles as well and by paying a little extra premium, you can safeguard yourself from a lot of hassle.

Normal Commercial Vehicle Insurance Vs. Zero Depreciation Insurance Cover

Some common differences between Normal Commercial Vehicle Insurance and Zero Depreciation cover are as follows:

  • Claim Settlement: In case of zero depreciation cover, the depreciation of the vehicle does not affect the claim settlement and you get the full compensation. On the other hand, with normal commercial vehicle insurance, the claim amount is received after deducting the depreciation.
  • Vehicle’s Age: A zero depreciation cover is for new cars, however, you can opt for a normal vehicle insurance policy for vehicles that are above three years.
  • Cost of Repair: With zero depreciation cover, the repairing cost of glass, fiber, plastic parts, and rubber is borne by the insurance provider. While in the case of normal cover the cost of repair has to be borne by the policyholder.
  • Premium: The premium for zero depreciation cover is higher than the premium of normal car insurance.

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Points to Consider Before Opting for Zero Depreciation Cover

Mentioned below are some of the factors that you must consider before purchasing a zero-depreciation cover:

  • Age of Your Vehicle: The age of your vehicle matters when you are going to purchase zero depreciation cover for it. Vehicles under the age of three years are applicable to get the zero-depreciation cover. So, in other words, we can say that only new vehicles are eligible to get zero-depreciation cover.
  • Premium: While comparing a zero-dep policy with a normal vehicle insurance policy, you will find that zero depreciation cover is slightly expensive. In this way, it advisable to pay high premiums for vehicles that are new. However, if your commercial vehicle has to work in a high-risk area, then you should opt for a zero depreciation cover. The zero-depreciation cover depends on three main factors:
    • Model of your vehicle
    • Ag of your vehicle
    • The location where the vehicle will be running
  • Claim Limitation: With zero-depreciation cover, you can make only a limited number of claims. This is done to limit the policyholders from making claims even for a small dent. It is to be remembered here that when you claim with a normal vehicle insurance policy, the insurance provider reimburses the depreciated value of the parts of your vehicle that you replace. According to IRDAI, the below-mentioned rate of depreciation for the parts of the vehicle are defined:
    • For nylon, rubber, and plastic parts, and the battery of the vehicle - 50% depreciation is deducted.
    • For wooden parts - the deducted depreciation is according to the age of the vehicle. This is 5% for the first year, 10% for the second year, and so on.
    • For the components of fiberglass - the deducted depreciation is 30%.

The Final Words!

In general, it is believed that zero-depreciation cover for vehicles is appropriate for new commercial vehicles and new and inexperienced drivers because they are more prone to vehicle damage. However, this should not be considered as a thumb-rule as there have been many cases when experienced drivers encounter unfortunate events because of the fault of other drivers.

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