Zero Depreciation Car Insurance

1. Protects Against Financial Loss: This add-on helps you avoid paying the depreciation gap from your own pocket. Without it, you would be responsible for covering the difference, which can be significant for major damages. 

1. Affordable Coverage: While the Zero Depreciation Add-on comes with an additional premium, it remains affordable. By comparing premiums online, you can select the best plan that offers comprehensive protection without overextending your budget. 

1. Increases Claim Settlement Amount: The Zero Depreciation Add-on ensures you receive the full repair cost. For example, if repairs cost Rs. 30,000, this add-on guarantees the entire amount is covered, rather than a reduced settlement due to depreciation. 

Depreciation Rate In Car Insurance:

Though the depreciation rates taken into account vary from one insurance company to another, there are some standard policies followed by every company. Some parts of the car age faster than the others. Hence the depreciation value is higher for them. Depending on these factors, the insurer applies different depreciation rates for different parts of the car.

Rubber/plastic parts, tyres/tubes, battery etc. are susceptible to maximum amount of wear and tear. Hence, the depreciation rates applied on them are usually higher compared to other parts like fibre glass, etc. The depreciation of metallic parts are based on the age of the vehicle.

The Insurance Regulatory and Development Authority (IRDA) has set some guidelines on the depreciation of car parts:

Depreciation Rates for Car Parts and Metallic Components 

The table below outlines the depreciation rates for various car parts based on the vehicle's age. It differentiates between standard parts and metallic components, highlighting how depreciation increases over time.  

What is not Covered in Zero Depreciation Plans?

Zero depreciation plans, also referred to as bumper to bumper insurance, have some exclusions as described below:

Reasons why you should choose a zero-depreciation insurance cover: 

The below listed are some of the reasons why you should opt for a zero-depreciation insurance cover: 

1. Complete claim settlement: In zero depreciation car insurance, you get the full claim amount without deductions for the depreciation of car parts.  

1. Save cost on repairs: This type of car insurance covers the entire cost of repair or replacement for damaged car parts like plastic, metal, and fiber, which would otherwise be partially paid under a standard policy. 
2. Ideal for New Car Owners: If you have recently purchased a car, especially a luxury or high-end model, zero depreciation insurance safeguards expensive components. 

1. Perfect for High-Risk Areas: For those living in accident-prone or high-risk areas, this cover reduces the financial burden of unexpected repair expenses. 

1. Beneficial for New Drivers: New drivers are more prone to minor accidents. This cover ensures that you won’t bear the additional cost of depreciation during repairs. 

1. Maintains Your Car's Condition: If you prioritise keeping your car in top-notch condition, this add-on helps cover frequent minor repairs like dents and scratches. 

1. Helpful for Lack of Parking Space: Without a dedicated parking space, the risk of damages increases. Zero depreciation insurance protects against such potential expenses.

Eligibility for Buying Zero Depreciation Cover:

If you are the owner of a new car, buying a zero depreciation rider to enhance its insurance coverage is a good idea. The rider also suits new drivers who are more prone to damaging their vehicles. However, it should be noted that even the most experienced of drivers can be involved in an accident that was the fault of the third-party. In this situation also, a zero depreciation cover would come to the rescue of the driver.

So, if you own a new car and do not mind paying the extra premium for this add-on cover, you should go for it.

Differences Between Zero Depreciation & Comprehensive Car Insurance Policy:

Benefits of Zero Depreciation Car Insurance:

The following points illustrate the benefits of zero depreciation car insurance, from the context of an average, everyday motorist:

1. Provides complete repair cost coverage without factoring in depreciation from wear and tear. 

1. Covers damages to glass, plastic, nylon, and fibre parts, unlike standard insurance policies. 

1. Slightly higher premium, but the cost difference is compensated during major claims. 

1. Ensures no out-of-pocket expenses for repairs, offering effective accident-related repairs at no cost. 

1. Preserves the car's value by supporting high-quality repairs and part replacements. 

1. Eliminates depreciation-related costs, leading to significant long-term savings. 

1. Ideal for new or luxury cars, protecting expensive components and maintaining top condition. 

1. Minimises repair expenses for unexpected damage, especially in high-risk areas or environments. 

Example to Understand  Zero Depreciation Cover:

Let us consider an example to understand how the zero depreciation cover works in the event of a claim. Say, the cost of your car is Rs.8 lakh. Suppose the cost of damage to its parts and depreciation is as shown below:

So, if you have a comprehensive car insurance policy without the nil depreciation cover, you will have to pay Rs.6,100 for the repairs.

Now consider a scenario in which you have the zero depreciation cover attached to your base auto insurance policy. The total expenses that you will be bearing in a year are as detailed in the table below:

The above table indicates that the policyholder can get significant savings even if he/she raises only one claim in a year.

Important Aspects of Zero Depreciation:

1. Applicable only on new cars:

Usually, only new cars can avail the zero depreciation add-on. A certain age limit is given by the insurer, with regards to the same. If your car is older than the specified limit, it is not eligible to enjoy this add-on.

1. Compulsory excess:

The coverage offered is not 100%, always. Some insurers don’t cover normal wear and tear and mechanical breakdown under this add-on. Every customer who has taken a zero depreciation has to pay a mandatory policy excess. This is known as compulsory excess.

1. Restriction on number of claims:

A zero depreciation add-on cover may limit the number of claims that can be made annually. Again, this may vary from one insurance company to another.

Your car is vulnerable to a lot of threats, damages and unforeseen circumstances. A comprehensive car insurance policy protects your car from every possible danger. Strengthen this protection by choosing from a wide range of add-on covers. Give your vehicle the attention and care it deserves by choosing the right car insurance policy and add-on covers.

Factors that determine zero depreciation car insurance premium: 

The below listed are some of the factors responsible for determining zero depreciation car insurance premium: 

1. Age of the Car: This type of insurance cover is typically available for cars up to 5 years old. There are chances that older cars have higher premiums or may not qualify for zero depreciation cover. 

1. Insured Declared Value (IDV): The IDV represents the car's current market value and plays a key role. A higher IDV results in a higher premium. 

1. Location of Registration: Cars registered in metropolitan cities or accident-prone areas attract higher premiums due to increased risk factors. 

1. Type of Policy: Comprehensive insurance with a zero depreciation add-on costs more than a standard third-party policy. 

1. Add-On Covers: Opting for additional covers like engine protection or roadside assistance increases the overall premium. 

1. History of claims raised: A history with a smaller number of claims raised often leads to discounts, while frequent claims result in higher premiums. 

1. Usage of car: The amount of premium also varies based on the car’s purpose, such as personal or commercial use, and the average distance it covers. 

How to Buy Zero Depreciation Car Insurance 

To buy zero depreciation car insurance, follow these simple steps from the insurer: 

1. Step 1: Start by comparing different insurers offering zero depreciation coverage. Look for their plans, premium rates, and customer reviews to make an informed decision. 

1. Step 2: Choose a comprehensive car insurance policy, as zero depreciation is an add-on to such plans. Make sure the insurer offers this feature and check the terms and conditions. 

1. Step 3: Once you have selected the comprehensive policy, add the zero depreciation cover to your policy. This will ensure that depreciation is not factored in during claim settlements. 

1. Step 4: Submit necessary details about your vehicle, such as the model, make, registration number, and age, to the insurer. This helps determine the premium and eligibility for zero depreciation coverage. 

1. Step 5: Understand the premium amount, which will be higher than a standard policy, due to zero depreciation cover. Ensure it fits within your budget. 

1. Step 6: Once you have agreed on the policy terms and premium, proceed with the payment to activate your coverage. 

1. Step 7: After payment, the insurer will send you the policy documents. Review them thoroughly to ensure zero depreciation cover is included. 

Note: Remember that zero depreciation cover needs to be renewed annually, along with your regular comprehensive car insurance policy. 

How to Renew Zero Depreciation Car Insurance?

To renew zero depreciation add-on car insurance, follow these simple steps from the insurer: 

1. Step 1: Review your current policy to ensure it still meets your needs and includes zero depreciation cover. 

1. Step 2: Contact your insurer or visit their website to check the renewal terms and ensure zero depreciation is still available. 

1. Step 3: Evaluate the premium for the renewed policy, as it may increase due to factors like the car's age. Make sure the revised premium fits your budget. 

1. Step 4: Update any vehicle details if necessary, such as modifications or new information that might affect your coverage or premium. 

1. Step 5: Inquire about any discounts or offers that could lower your premium, such as safe-driving discounts or no-claim bonuses. 

1. Step 6: Proceed to pay the renewal premium through the insurer's online portal or other available payment methods. 

1. Step 7: Once payment is made, the insurer will send you the updated policy documents. Review them carefully to ensure zero depreciation cover is still included.