Ever since the Motor Vehicles Act made it mandatory for car owners to have a motor insurance policy, Insurers have provided a diverse range of motor insurance products that protect the insured from the financial jolt that follows in cases of accidental repairs. Zero-depreciation is one such add on cover that offers comprehensive coverage.  

 

With the rise in road accidents and increased sales of luxury or sports cars, choosing an insurance policy that offers comprehensive coverage is recommended. Zero depreciation add-on cover in car insurance ensures complete coverage, negating the impact of depreciation.

 

What is depreciation?

 

Depreciation is the loss of value of a vehicle over time due to age, wear and tear and obsolescence. For example, if a new car is purchased for Rs 10 lakh its value will decrease with every passing year. If the car is one year old and the depreciation rate is 10% then the value of the car becomes Rs 9 lakh after one year. 

 

In the event of an accident after one year, the insurance company will calculate the claim based on Rs 9 lakh. They will also have certain deductions and exemptions; in fine print that are applicable to the policy. 

 

A safe bet would be to opt for the “Zero-Depreciation Cover” that covers the entire cost of repairing the car without any depreciation costs and other incidental costs that insurance companies do to reduce their liability. For instance if your car is damaged in a collision and you make a car insurance claim with the insurer you will be reimbursed the total repair cost without factoring in the depreciated value of the car. Zero depreciation policy is also known as “Bumper-2-Bumper” cover or “Nil Depreciation”.

 

If it fits your budget, it is always advisable to opt for zero-depreciation car policy for complete peace of mind. One accident will convince car owners about the necessity of having a zero-depreciation policy

 

In the case of comprehensive insurance cover the policy holder is reimbursed by the amount after a complex calculation taking into account the depreciated value of the car. Whereas, in the case of “Zero-Depreciation” policy the insured car will be reimbursed the full amount of the repair cost regardless the age and current value of the car. Obviously, zero-depreciation cover will cost more – close to 20% and more than any standard no-frill policy that is available in the market. This is because the insurer takes a greater risk. For Example, the zero-depreciation premium add-on for a new Rs 5 lakh would be about Rs 4000-4500. For a mid-segment sedan priced at Rs 10 lakh you can expect a premium would be about Rs 8000.

 

Though it may seem like a steep price for an add-on cover, it is worth the cost as the compensation amount will prove to be significantly higher than the premium.

 

These are a few things to keep in mind when purchasing zero depreciation car insurance:

 

• This add-on is available only for cars that are less than five years old.

 

• The zero depreciation cover does not deduct the compulsory deductibles of the policy.

 

• There is a limited number of zero depreciation claims within a year.

 

• Zero depreciation cover and the bumper to bumper to cover offer the same coverage.

 

When you pay a higher premium amount for the cover, you are indirectly paying for the depreciated cost of the vehicle. This is not palatable to cost conscious customers and could be a real deal breaker for them. Zero-depreciated cover gives you peace of mind and insulates you from future shocks from the insurance companies when they settle the claim. However, this policy pays for itself when you meet with an accident and you do not have to foot the bill. The number of times that you can make in a zero-deprecation cover is limited. This is to prevent customers from making claims for every dent and scratch. 

 

Who Should Opt for a Zero Depreciation Cover Add-on?

 

Here is the list of types of people who should buy the zero depreciation cover:

 

1. New Car Owners – New car owners who have purchased a new car should opt for this cover as depreciation starts since the car is sold. Hence, if a new car gets damaged, one might not get a good amount of claim without this add-on cover.

 

2. People who have Luxury Cars that have Expensive Parts – If you own a luxury car and it gets hurt due to an accident, it clears that you will have to spend a huge amount on its repair. Hence, a complete amount of claim can only help you to get your car repaired easily.

 

3. People Living in Accident-Prone Areas – People who reside in accident-prone areas are more likely to get indulged in accidents. Therefore, in order to receive a relevant amount of claim to get their cars repaired they should pick the zero-depreciation cover.

 

4. New Drivers - People who have just begun to drive a car or a new driver could take a little more time to become an expert and are more likely to get involved in a collision. Hence, this add-on cover is a must for such people.

 

5. Regular Car Users – Since accidents can bring any amount of damage, hence, it may not be easy for even old car owners to bear the cost of repair. Hence, if your car is eligible to be covered with the zero depreciation plan, you should opt for it.

 

Benefits of Zero Depreciation Car Insurance Cover

 

The benefits of zero depreciation car insurance cover are mentioned below:

 

1. Enhances Coverage: A zero depreciation add-on cover is not just beneficial for amateur drivers but also for experienced drivers. It offers additional protection to the policyholder from financial crises arising due to damages or losses to the car in an accident or mishap. Also, this cover reduces the expenses of policyholders to almost zero.

 

2. Repair Cost Considered Without Depreciated Value: Cost arising out of replacement or repair of car’s insured parts are resolved without taking into account the depreciated value.

 

3. Curbs Additional Expenses: Expenses arising out-of-pocket are limited as the cost of depreciation is not considered while going for claim settlement.

 

4. Save Money in the Long Run: With a zero depreciation cover, the premium amount becomes higher. However, in case of a mishap, the claim amount will not take into account the depreciation of the car hence giving you a higher compensation. This compensation amount is usually much higher than the premium paid for the add-on and

 

5. Greater Compensation: The limit of the claim you can receive is determined by the policy’s IDV. This is directly affected by the depreciation rate. Hence, with the zero depreciation add-on cover, you can make claims that do not take into account the depreciation rate of the car and receive a higher claim amount.

 

6. Greater Peace of Mind: Car insurance provides a layer of protection for the car owner and the car by compensating for losses and peace of mind. This is further strengthened by a zero-depreciation add-on cover as it negated the depreciation rate of the car.

 

Zero Depreciation Car Insurance Vs Comprehensive Coverage

 

The difference between zero depreciation cover and comprehensive cover can be understood with the help of the table below:

 

 

Some of the key exclusions under the zero depreciation car add-on cover are cars more than 5 years old, maximum number of claims, vehicles with more than a specified number of kilometres covered, car engine damage due to oil leakage or water ingression, ear and tear to clutch plates, tyres, bearings, and more, cost of oil, etc.

 

Zero-depreciation is a good deal even if you have to pay a little extra. It will pay for itself many times over when you meet with an accident. You will be glad you decided on the zero-depreciation policy when you are presented with a bill from the garage.

 

Take the time to compare on site that give you comparisons of different insurers and make knowledgeable decision before you take the plunge.