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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.
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
Why Should You Get Zero Depreciation Add-on with your Car Insurance?
Standard car insurance policy deducts depreciation amount, thus, leaving you with a lower payout than the actual repair costs. So, having a Zero Depreciation add-on reduces your out-of-pocket expenses to almost zero during the claim, ensuring you receive the full Insured Declared Value (IDV) for repairs or replacements. This is because without a Zero Dep add-on the cost of depreciation of the parts must be borne by you. But with a Zero Dep addon, that is taken care of by your insurance company.
Securing your car with a zero-depreciation add-on means you get protection from financial loss and compensation for the full repair or replacement amount, as depreciation on your car’s parts won’t be calculated. Thus, you’ll receive a higher amount during claim settlement.
You can opt for the Zero Depreciation Car Insurance Add-on Cover along with your standard Comprehensive or Own Damage car insurance policy by paying an additional premium, which is generally low and affordable. This way you can protect your car and your pocket at an affordable cost.
Accidents are financially and mentally draining, and worrying about covering repair costs shouldn't add to the burden. So, opting for a zero depreciation addon assures you that you are financially protected in case of an accident, which can be so satisfying and really gives you some peace of mind.
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:
The claim will not be entertained if the car insurance policy has expired.
In case, the damage caused to the vehicle can’t be inspected before it is repaired, the insurer is not liable to entertain the claim.
Loss claimed for damage caused to the covered vehicle under different types of insurance policy will not be covered by Digit.
A claim will not be payable under Zero Depreciation add-on if it is not covered under OD section of the policy.
The add-on cover will not entertain any claim if there is a delay of more than 30 days since the damage was caused.
The insurer will not cover depreciation amount applicable to parts like battery and tyres of the insured vehicle as per the policy.
The cost incurred by the policyholder to repair any part, subpart or accessory in the vehicle which is not approved under the car insurance policy can’t be claimed for.
Factors Affecting Zero Depreciation Car Insurance Premium
Following are the factors that will affect the premium of your zero depreciation addon cover:
Since a zero depreciation addon is directly related to the aging of your car and its parts, the age of your car plays a huge factor in determining the premium for your zero depreciation addon cover.
In a car insurance, a lot depends on the model and type of your car. Since the cost of its parts too will depend on it. Therefore, the kind of car you have also plays a huge factor in determining the cost of your zero depreciation addon cover.
Every city faces different risks when it comes to driving on the roads. Therefore, in a car insurance, your premium- including the additional premium of your zero-depreciation cover will be dependent on the city you drive your car in.
Premium is subject to change if your car is a diesel, petrol, CNG, or electric type. Further, the zero-depreciation premium is comparatively higher for cars with an engine of higher cubic capacity than those with lower cubic capacity.
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.
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FAQs about Zero Depreciation Car Insurance
Can I get zero-depreciation car insurance after 5 years?
Yes, a zero-depreciation add-on can be bought with your car insurance policy after 5 years if your insurance company approves it, following a thorough assessment of your car.
Is there any restriction on the number of claims?
Zero Depreciation cover will be valid only up to the specified number of times mentioned in your policy; however, the total amount of claim is up to your sum insured.
How does a zero-dep insurance policy affect the claim settlement process?
Having a zero-depreciation add-on as part of your plan ensures that during a claim settlement, you get your complete claim amount- without subtracting or accounting for your car’s depreciation.
Is zero depreciation add on different from comprehensive cover?
Yes, a zero-depreciation cover is an add-on you can opt for in your comprehensive policy while a comprehensive cover is nothing but your standard car policy that covers for both third-party and own damages.
Why should I get a zero-depreciation cover?
If you want to save on your in-pocket-expenses, you should get this add-on. Further, if you are a new driver, own an expensive car, live in an accident-prone area, or have expensive spare parts, Zero Depreciation add-on cover is worth buying.
Can I get zero-depreciation cover with third-party car insurance?
No, a zero-dep car insurance cover can only be purchased as an add-on with a comprehensive car insurance policy and not with third-party policy. No add-on can be bought with a third-party policy.
Can I get zero-depreciation cover with third-party car insurance?
No, a zero-dep car insurance cover can only be purchased as an add-on with a comprehensive car insurance policy and not with third-party policy. No add-on can be bought with a third-party policy.
Is zero depreciation car insurance cover suitable for new cars?
Yes, zero-depreciation add-on cover can be opted for new cars and even older cars less than five years old, depending on your insurer.
How does zero depreciation addon cover affect IDV?
If you have a Zero Depreciation cover, your vehicle's IDV will be higher compared to a standard car insurance policy.
What is the difference between zero depreciation and own damage cover?
Own Damage cover provides protection only for damage to your own car, and it considers depreciation at the time of claim. However, if you separately buy the Zero Depreciation add-on cover, you get financial protection as it eliminates depreciation amount.
Is the engine covered in zero depreciation add-on cover?
No, zero-depreciation car insurance does not cover damage to the car engine due to its engine through oil leakage or water ingression.
Which is better, comprehensive car insurance or zero dep add-on?
Both have their own advantages depending on your needs. If you have bought a new car, getting comprehensive car insurance is a better option as it offers more comprehensive coverage. However, if your car is older, getting the zero dep cover along with comprehensive insurance zero depreciation insurance will provide better coverage without considering for depreciation.
Are car tyres included under zero dep cover?
No, zero depreciation add-on does not cover car tyres as they undergo wear and tear at a faster rate.
Can I avail the benefit of No Claim Bonus in a zero-dep car insurance policy?
Yes, you can avail the accrued NCB discount if you have not made a single claim during the policy term.
Can third-party car insurance be converted to zero depreciation?
No, you cannot convert third-party car insurance policy into zero-dep car insurance. Zero depreciation is an add-on cover that can only be purchased along with a comprehensive or own damage car insurance policy.
Is it possible to transfer zero-depreciation add-on cover to another car owner?
Yes, you can easily transfer the zero-depreciation car insurance add-on cover to the new owner. Since it is an add-on with the standard insurance policy, when you transfer your car insurance policy to the new owner, zero dep car insurance also gets transferred simultaneously.
How much will my zero-depreciation car insurance policy cost?
Zero dep add-on premium depends on various factors including the age of your car, its make and model, geographical location, and fuel-type and engine of your car.
How to know if my car insurance includes zero depreciation cover?
You can know if your car insurance policy includes zero dep car insurance add-on by checking your car insurance policy documents. Alternatively, you can also ask the same from your insurer.