Zero Depreciation Insurance

Zero depreciation insurance is an additional benefit that every car owner can enjoy by paying an extra or higher premium. This policy is usually not included in the standard and comprehensive insurance policy.
During the time of the insurance claims, every insurance company calculates and applies the depreciation rate to determine the payable amount(regarding the damaged part of the car) for settling the claim. The cost difference between the market price of the new part and depreciated part needs to paid by the insured owner of the vehicle.
With the addition of zero depreciation cover, the benefit is that the insurer covers the entire cost without accounting for the vehicle’s depreciation when you file an insurance claim due to the damage/loss to the car. The zero deprecation is a lucrative cover for the customers who want a smooth claim settlement in the future. For the brand new or a lavish car, buying this zero-depreciation is worth for investment.

Depreciation Rate In Car Insurance

Though the depreciation rates vary from one insurance company to another, however, there are some standard policies with which every insurance company is compliant. Some parts of the car depreciate faster than the others. Hence the depreciation value will be higher for them. Depending on these kinds of factors and the brand of car, the insurer applies depreciation rates to different parts of the vehicle.

Some Guidelines Set by IRDA

Plastic, nylon, and rubber parts	50% depreciation
Car batteries	50% depreciation
Fiberglass components	30% depreciation
Wooden and metallic components	The depreciation is determined based on the age of the vehicle. It could be 5% at the completion of the first year, 10% at the end of the second year, and so on.

Essential Features of Zero Depreciation

• Applicable only to new cars
• A certain age limit has been fixed by the insurer, with regards to this insurance cover. If the vehicle would be older than the specified threshold, the owner won't be eligible to enjoy this privilege.

What is Compulsory Excess?

The compulsory excess is the amount that the policyholder needs to pay for making a claim. It is of two kinds: Compulsory and Voluntary. The compulsory excess is the minimum amount the insurer allows the policyholder to pay. The level of the compulsory excess is based on the details you provide while applying for a quote and voluntary excess is the amount, that the insured person is agreed to pay over the compulsory excess.

Why Insurers Add Excess in The Policy?

The Insurers don't want the drivers to claim for every little bump and scratch; they get in the vehicle. Therefore, the insurers insist drivers for paying the first part of any claim themselves as the way of preventing requests for minor repairs costing less than Rs. 20,000.

Restriction on The Number of Claims

The zero depreciation add-on cover may restrict the number of claims which can be made annually by the policyholder. Again, it may vary from the one insurer to another.
The comprehensive insurance policy protects the car from every possible damage. The policyholder can strengthen this protection by choosing various add-on covers.

Benefits of Zero-Depreciation Car Insurance

The following points illustrate several benefits of zero depreciation car insurance

• While raising the claim, the insured person remains assured of 100% settlement of the vehicle’s repair cost without getting considered for depreciation factor.
• The standalone and the comprehensive car insurance policy are not accountable for the damages incurred by the glass, plastic, nylon, fiber,  and other parts of the vehicle. However, the zero-depreciation policy considers them.
• The entire cost of subscribing to the zero-depreciation car insurance policy might be much more than the conventional car insurance policy; however, this gap is usually narrowed down when the insured person raises a claim after the particularly nasty accident.

 

Who Should Purchase The Zero Depreciation Cover?

The owner of the new car should buy a zero depreciation rider to enhance the insurance coverage. This cover is also apt for the new drivers who are prone to damaging their vehicles.
So, if you bought a new car and can afford to pay the extra premium for this add-on insurance cover, then it is advisable by mymoneykarma experts that you should buy it.

Premium Payable for The Zero Depreciation Cover

The price of zero depreciation cover is quite high as compare to other insurance policies and also offers the benefit of the 100% claim. Usually, zero depreciation add-on cover costs around 15%-20% more than the base policy rate.
However, the actual cost differs by the driving history of the policyholder and the regulations set by the insurance company.

Exclusions in Zero Depreciation Insurance Plans

• The plan is not applicable to the cars that are over five years.
• The zero depreciation cover is not offered to vehicles that have traveled more than the specified number of kms.
• The depreciation covers usually have limitations on the maximum number of claims that can be filed in a year by the insured people. This is implemented by insurance companies to prevent policyholders from raising the claims for every minor dent or damage. The limits vary from one insurer to another, so the policyholder should check the policy documentation to understand the specifics for the plan.
• The zero depreciation cover doesn't protect the car from damage to its engine through the oil leakage or the water ingression.
• Standard wear and tear to vehicles and the car parts such as the clutch plates, tires, bearings, are not covered under the zero depreciation insurance cover.
• Other exclusions from the bumper to bumper insurance include the mechanical breakdowns(which haven't occurred in an accident) and the consequential damages.
• Cost of the oil, such as gear oil, engine oil, coolant, clutch oil, and brake oil, doesn't come under the ambit of insurance cover.
• The private car is used for commercial needs is not included in the plan coverage.
• The driver who doesn't have a valid driving license is also not eligible to apply for this insurance.
• The driver under the influence of drugs or alcohol is excluded from the coverage.
• If the claim is not filed within the stipulated timeframe, it will not remain valid.
• The driver using the car for vindictive purposes is also not covered in it.

What is a Null And Void Zero Depreciation Claim?

When the claim is raised against the zero depreciation add-on cover, it will not be supported by the insurer if any of the exclusion criteria are met with the insured person. It is essential that the policy holder provides accurate information with the supporting documents while raising the claim to remove it from being invalidated.

FAQs

Q1. What factors affect the premium of a Zero Depreciation Cover?
The premium paid towards a zero depreciation add-on cover is based on several factors:

• Age of the vehicle
• Model of the car
• The place of usage and parking of the car.

Q2. Which insurers in India offer the zero depreciation insurance cover?
Most of the Indian insurance companies provide zero depreciation cover as an add-on policy. It includes

• Bajaj Allianz
• Bharti AXA
• Tata AIG (refers to the depreciation reimbursement cover)
• Royal Sundaram (refers to the add-on of the depreciation waiver cover)

Q3. Will the zero depreciation add-on policy provide the coverage for theft of the tires?
It depends on the terms and condition of the policy. Usually, the insurers offer this cover only for the repair and replacement of tires/tubes due to accidental damage.