An old car is always valued less than a new one while buying and reselling. This is due to the depreciation of car components over the years, as they have a limited lifespan. So, depreciation is a factor that affects the monetary value of your car due to the natural wear and tear as you use it.  

Since the cost of your insurance policy or premium depends on the car’s value; thus, when the value of your car depreciates, the premium of your car insurance also reduces. This implies that if you make a claim, the car insurer will deduct the depreciation amount from the total claim amount payable, and you will receive compensation lower than the car’s actual value. However, the solution to this is opting for a zero-depreciation car insurance add-on. 

Now, let us understand with the help of an example:

Consider person A bought a new car worth Rs. 5 lakhs. They paid Rs. 10000 as a premium for their car insurance policy in the first year. 

Now, after one year of using the car, due to the normal wear and tear of its components, the car’s value has reduced to Rs. 4 lakhs and the cost of the insurance policy has dropped to Rs. 8000 in the first year. This will continue with each passing year.

Most cars start losing their value from the moment they are driven on the roads, while some cars still look good even after a few years. So, why is this discrepancy in their depreciation? Let us read about the factors that affect it.

• Car’s Age and Kilometres Covered: Car’s depreciation increases with its age; thus, the price of a 5-year-old car would be significantly low. However, if it is a well-maintained and highly demanded car, the owner can still expect a decent price. The same applies to the kilometers run by the car, as its efficiency will reduce due to wear and tear and of the components if kilometres covered are more.

• Car’s Condition and Maintenance: If your car makes rattling sounds or has performance issues, then it will have a higher depreciation value, while a well-maintained car will have undergone less depreciation. Every buyer will inspect the vehicle, with the help of a mechanic.  So, timely replace the defective or underperforming component and get periodic replenishments done to ensure your car remains in its best condition possible. 

• Make/ Model of Car: Some prominent car brands have a perceived reputation of making more trusted and reliable models, so the depreciation rate will be less for these car brands or models, and you can get a relatively higher value in the pre-owned car market. 

• Type of Fuel: Fuel-efficient cars, such as hybrids and electric cars retain their value for a longer period as they have slower depreciation rates than others.

Zero Dep Car Insurance add-on is your solution to nullifying the impact of depreciation on your insurance and getting the full value of your car as the claim amount. If you secure your car with Zero Depreciation add-on in Car Insurance, the insurer won’t calculate the depreciation on your car’s parts, and hence you’ll receive a higher claim amount. 

Therefore, with this add-on, you can have peace of mind as depreciation will not impact your policy in any way; the cost of depreciation of the car components will be borne by the insurance company and not you. 

You can buy the add-on while purchasing an insurance policy for your new car or while renewing an existing car insurance policy.

NOTE: Most insurance companies offer the Zero Dep Car Insurance Add-on for new cars for the first five years. After this, the policyholder must bear the cost of depreciation. Please get it confirmed by your insurer before buying the policy. 

Thus, there is a significant impact of depreciation in car insurance premiums, due to which you can be at a loss when filing for claims. If you don’t want to bear the costs of depreciated car components, go for the Zero Depreciation Car Insurance Add-on provided by your insurance company.