Zero Depreciation Car Insurance Policy: Coverage & Benefits Explained
If you’re worried about spending a large part of your savings on car repairs after an accident, Zero Depreciation Car Insurance policy is your solution. This car insurance add-on offers peace of mind to you by removing depreciation costs during claim settlements.
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What is Zero Depreciation Car Insurance?
Zero Depreciation add-on cover, also known as bumper-to-bumper or nil depreciation cover in a comprehensive car insurance policy ensures that the insurer does not deduct the depreciation amount on the assessed car parts as per the policy document.
The benefits under the zero dep add-on can be utilized up to a maximum of specified number of times during the policy period.
Thus, if you have zero depreciation add-on cover, you can claim the total cost of replacement of damaged car parts in case of an accident and save a huge amount.
What is Depreciation?
Depreciation in car insurance is the decrease in the market value of your car over time due to its natural wear and tear. Thus, the older your car is, the higher is its depreciation.
It's a factor that comes into play when you make a claim for damage to your car under a comprehensive car insurance policy.
You can calculate depreciation on your car in 2 ways:
If you’ve a new car, its value starts to depreciate as soon as it hits the road. This is known as overall depreciation, which is generally used for calculation in case of total loss or theft.
In case of partial loss or damage to your car, the depreciation of specific car parts is calculated separately.
Depreciation in Car Insurance Explained
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Why Should You Get Zero Depreciation Add-on with your Car Insurance?
How is Depreciation Calculated in Car Insurance?
According to the Insurance Regulatory and Development Authority of India (IRDAI), following are the depreciation rates, on the basis of which the total depreciation of your car is calculated:
Depreciation Rates for Different Parts in Vehicles
Depreciation Rates for Metallic Parts in Vehicles
Depreciation Rates for All Other Parts in Vehicles
Depreciation Rate for Fixing IDV of Vehicle
What is Not Covered Under Zero Depreciation Add-on Cover?
Under Zero Depreciation add-on cover, certain things in addition to the general exclusions listed under car insurance are not covered. Let us look at them in detail:
Factors Affecting Zero Depreciation Car Insurance Premium
Following are the factors that will affect the premium of your zero depreciation addon cover:
Why is a Comprehensive Policy with Zero Depreciation Add-on Better than a Policy Without Zero Depreciation?
A comprehensive policy is no doubt a great way to protect your car from all possible damage. However, during claims you will still be required to pay for your car’s part depreciation.
Let’s understand the difference between Comprehensive Policy with and without Zero Depreciation Add-on cover:
Role of a Zero Depreciation Cover During Claim Settlement
The main role of a zero-depreciation cover during claims is to save the money you’d be spending from your pocket.
Let’s take an example to make this simple for you.
If your total claim amount payable is ₹20,000 and the total cost of your car part’s depreciation is ₹6,000, then without having a zero-depreciation cover- your insurer will account for this cost and only pay you ₹14,000. However, if you have zero depreciation cover, then, you will receive the entire ₹20,000 as your claim amount! 😊
Things to Remember about Zero Depreciation Insurance
Zero Depreciation add on cover policy will not be valid once you have claimed for the specified number of times as mentioned in the policy document.
A Zero Depreciation only covers the cost of your car’s part depreciation during claims and doesn’t cover your compulsory deductibles.
Claims made by the insured under this add-on are subject to the terms and conditions of your Car Policy.
Who Should Opt for a Zero Depreciation Cover?
If you plan to buy a new car soon, you should opt for a zero-depreciation cover in your comprehensive car insurance policy. You’re already spending a whole lot of money for your new car, spending a little more on its insurance with the right add-ons will help to prevent you from spending any more money.
So, if you are in any of the following categories, you should buy a Zero Depreciation Cover.
If you live or drive frequently in an accident-prone area.
If you have recently learned to drive a car.
If you cannot bear the sight of small dents and bumps on your car.
If you own a luxury car or have expensive spare parts.
If you wish to reduce your out-of-pocket expenses in case of any damage.