Zero Depreciation Cover in Commercial Vehicle Insurance

Zero Depreciation cover in commercial vehicle insurance is an add-on that helps to protect your commercial vehicle against various physical damages without factoring in the element of depreciation. This cover you get the maximum reimbursement at the time of claim.

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Impact of Depreciation on Commercial Vehicle

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 commercial vehicle insurance companies pay 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 can help you get the most from your commercial vehicle insurance cover.

What is Zero Depreciation Cover in Commercial Vehicle Insurance?

A zero depreciation add-on cover can be purchased with a comprehensive commercial vehicle insurance company. With this add-on a policyholder does not have to pay the amount of depreciation borne by the commercial vehicle at the time of claim. Thus, this add-on ensures full claim payout without considering the depreciation of the insured vehicle. You can avail a zero depreciation cover for your brand-new commercial vehicle or add it while renewing the policy.

Thus, in a 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 commercial vehicle insurance zero depreciation 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 cover adds value to your basic commercial vehicle insurance cover and ensures you do not have to pay anything from your pocket in case of damage or loss to your commercial vehicle.

With this add-on 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.

Standard Commercial Vehicle Insurance Vs. Commercial Vehicle Insurance with Zero Depreciation Cover

Some common differences between a standard commercial vehicle insurance and a commerical vehicle insurance with zero depreciation cover are:

  • 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 a standard commercial vehicle insurance, the claim amount is received after deducting the depreciation borne by the insured commercial vehicle
  • Vehicle’s Age: A zero depreciation cover is for new vehicles and vehicles that are upto 5 years of age, however, you can opt for a normal commercial vehicle insurance policy for vehicles upto 15 years of age.
  • 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.

Points to Consider Before Opting 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 upto the age of five 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 adding 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 in a policy tenure. 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 standard 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 deducted:

  • 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%.

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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. Moreover, you can also compare premium of zero dep cover from best commercial vehicle insurance companies on before buying one.

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