It’s human nature to want to protect the thing we love the most! Just like a health insurance policy protects you and your family from unforeseen medical expenses, a car insurance cover protects your on-road companion at all times!
So, what happens when your car starts depreciating in value over time? To understand this, let us first look at what depreciation means.
Depreciation means the gradual decline in the value of an asset over a period of time. In the context of car insurance, a zero depreciation cover acts as an add-on cover which can be opted alongside a comprehensive or a standalone own damage policy. In case of a claim, the insurance company will provide compensation based on the depreciated value of the vehicle and its parts. This means that the policyholder has to cover the gap between the depreciated value of parts and their actual replacement cost.
For example, if your car was worth Rs.1 lakh when you bought it, and is worth Rs.50,000 now, you have suffered a depreciation of Rs.50,000.
What is Zero Depreciation Car Insurance?
Zero Depreciation Car Insurance means that the insurance company will not consider the normal wear and tear of your vehicle during claim settlement. The depreciating value of your car will not be taken into consideration and during instances such as road accidents where your car has suffered damage, the insurer will settle the claim without considering depreciation.
You can get a Zero Depreciation cover while purchasing a new car insurance policy or while renewing an expired policy.
Most insurers allow up to two zero depreciation claims during a particular policy tenure, however, it may vary from insurer to insurer.
Benefits of Zero Depreciation Car Insurance Policy
You can avail multiple benefits by purchasing a Zero Depreciation Car Insurance Policy. Some of them have been listed below:
- ● Insurer settles the whole claim after all the necessary deductions have been made.
- ● Zero Depreciation acts as a complementary add-on cover alongside your car insurance cover. You can purchase it at an additional cost.
- ● Your out-of-pocket expenses will reduce significantly during claim settlement.
- ● There is no need to worry about deduction from claim amounts on account of depreciation.
| Age of the vehicle: | Rate of depreciation: |
| Below than 6 months | Nil |
| Between 6 months and 1 year | 5% |
| Between 1 year and 2 years | 10% |
| Between 2 years and 3 years | 15% |
| Between 3 years and 4 years | 25% |
| Between 4 years and 5 years | 35% |
| Between 5 years and 10 years | 40% |
| Above 10 Years | 50% |
*For all parts other than nylon/plastic parts/rubber/tyres and tubes/batteries/and air bags, fiberglass components and parts made of glass.
Inclusions Under Zero Depreciation Car Insurance
If you are purchasing a Zero Depreciation Car Insurance, following are some of the things that will be included:
- ● Depreciable parts of cars including include nylon, plastic, rubber etc.
- ● Repair and replacement expenses will be settled by the insurer during claim settlement
- ● Some insurers also cover the wear and tear of car tyres or battery damage
- ● You can purchase a new Zero Depreciation Car Insurance or get one at the time of your insurance renewal
Exclusions Under Zero Depreciation Car Insurance
Listed below are some of the things that your insurance provider will not cover under Zero Depreciation Car Insurance:
- ● Damages caused due to mechanical failure and breakdowns
- ● Damages caused by an uninsured peril
- ● Complete damage or loss to the car
- ● Normal wear and tear of vehicles caused due to ageing and other factors
- ● Damage of car items that are not insured - including uninsured tyres, gas kits and so on
Difference between Zero Depreciation and Standard Car Insurance Policy
For better understanding, here’s a basic comparison between a Zero Depreciation Cover and a Comprehensive Car Insurance Policy:
| Standard Car Insurance with Zero Depreciation Cover | Standard Car Insurance without Zero Depreciation Cover | |
| Premium | Premiums are higher with better returns in the long run | Premiums are lower than a policy with a Zero Depreciation cover |
| Claim settlement | Claim is settled after certain deductions are made without consideration of depreciation and vehicle age | Insurer considers the depreciation and damage caused to all body parts before settling claim |
| Cost of plastic fibre | With a Zero Depreciation add-on cover, these costs will be covered | Insured will have to pay for such repairs out of his pocket |
| Claims | Zero Depreciation will typically cover up to 2 claims during the policy year, during which depreciation rates will be Nil | With age, your vehicle depreciates in value and such repair costs will not be covered under a standard insurance policy |
Therefore, if you are looking to save money on your car insurance purchase and get higher long-term returns, you should certainly include Zero Depreciation cover in it.
FAQs
1. Is Zero Depreciation cover useful for both new as well as old car owners?
A Zero Depreciation cover should ideally be purchased by the following:
- ● New car owners
- ● New drivers
- ● People residing in areas prone to accidents
- ● People owning luxury cars with expensive parts
2. Under what conditions can I avail a Zero Depreciation Car Insurance Cover?
If you have purchased a new car, you should most definitely get an add-on Zero Depreciation cover.
3. Can I buy a Zero Depreciation cover with a third-party car insurance?
No, you cannot convert a third-party car insurance plan into one with a Zero Depreciation cover. Similar to other add-on covers, a Zero Depreciation can only be opted either with a standalone Own Damage policy or a comprehensive coverage.
4. What are the factors that affect the premiums of a Zero Depreciation Cover?
Following are some of the factors that affect a Zero Depreciation Cover’s premiums:
- ● Car’s age
- ● Model of the vehicle
- ● Location where the policyholder is based
Moneycontrol journalists were not involved in the creation of the article.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
