Zero depreciation car insurance: Meaning, key factors, claim benefits & more

A car is one of the most valuable possessions of a person. Although a comprehensive insurance policy will cover dings, dents, scratches, and even medical costs you could incur as a result of an accident, the majority of policies do not safeguard you against normal wear and tear of car parts. But, what does this actually imply?

Luckily, with the aid of an add-on cover of zero depreciation in car insurance, there is a solution for you to avoid incurring those significant out-of-pocket costs. By getting zero-depreciation car insurance you can protect yourself from the part of the coverage formula that takes depreciation into account. If you choose to go for this add-on cover, your insurer will bear the complete cost of all the necessary repairs made to your vehicle after an accident.

What is zero depreciation insurance?

A zero depreciation in car insurance is basically an add-on cover that pays for the depreciation applicable to your car’s value. It enhances the standard insurance plan and makes sure your insurance coverage doesn’t involve any depreciation deductions.

A zero-depreciation car insurance online policy offers your car total protection against depreciation. As a result, the insurer will not deduct the depreciation value from any claim amount. A zero-depreciation cover is also known as Nil Depreciation or bumper-to-bumper car insurance.

Zero depreciation car insurance cover is widely adopted by almost all car owners to successfully escape the issues concerning depreciation. The option of zero dep cover is also available when renewing your car insurance.

Rate of depreciation applicable as per IRDAI

If you’re wondering what exactly is the rate of depreciation applicable to your car parts, The Insurance Regulatory and Development Authority of India determines the rate of depreciation (IRDA), which is as follows:

• 50% deduction: Applicable on car batteries, nylon, rubber, and plastic parts. 
• 30 % deduction: Applicable on fibreglass parts.
• Metal parts are subject to depreciation based on the age of the vehicle. (Source: IRDAI)

Factors affecting the zero-depreciation car premium

In addition to the Insured Declared Value or IDV, the premium for this specific add-on cover is significantly influenced by several internal elements. Such as:

• Car age: The older the car, the higher the premium will be. For cars older than five years, the majority of insurers do not offer zero depreciation cover; some have even limited it to three years. Nevertheless, some insurers have also begun to provide a 7-year nil depreciation cover.

• Car model: Certain car models are not covered under the zero depreciation policy. Therefore, before purchasing this add-on cover, you must necessarily consult with your insurer or agent.

• Location: If you are someone who lives in an accident-prone area, the premium for zero-dep insurance will be higher than usual.

• Type of engine: Vehicles having engines with higher cubic capacity tend to have a higher insurance premium than those with engines with lower cubic capacity.

• Installation of accessories: The premium for car accessories and features is computed individually.

• Type of coverage: The type of coverage you choose will also affect the cost of your premiums.  The premiums for comprehensive car insurance online are probably higher than those for third-party coverage.

• Fuel type:  Whether the vehicle is diesel, gasoline, CNG, or electricity powered, fuel type plays a significant role in determining the premium.

Advantages of zero depreciation cover during claims

The following are some major advantages of zero depreciation in car insurance coverage: 

1. Cut costs: In a basic insurance plan, you are responsible for covering the value of depreciation associated with the parts of the car. After deducting depreciation, the insurance company pays your claim amount.

But with a Zero Depreciation Cover, you can save that money as you’ll have access to the most exhaustive coverage. This means that you will not be required to pay anything from your pocket.

2. An enhanced claim amount: When you purchase a Zero Depreciation in car insurance cover, the insurance provider excludes the car’s depreciation and pays the full value of your claim.

As a result, your claim will be paid out more than it would with standard car insurance.

3. Peace of mind:If you have a Zero Depreciation Cover, you can rest easy knowing that the insurance provider will have your back in case of an unexpected event, such as an accident or damage. Without having to make any out-of-pocket payments, you get full coverage for your damages.

Who should go for zero depreciation cover?

The types of individuals who should go for a zero depreciation add-on cover are as follows:

1. New car owners: Car owners who just bought a new car should choose this coverage because depreciation has already begun since the sale of the car. Therefore, if your newly purchased car somehow gets damaged, you might not be able to acquire a fitting claim amount without this add-on cover.
2. Luxury car owners:If you have a luxury car and it gets damaged in an unfortunate event, it is obvious that you will have to shell out a significant amount of money on its repair. Therefore, filing a claim for the full amount will only make it easier for you to get your car repaired.
3. Residents of accident-prone areas:Residents of accident-prone areas are much more likely to experience accidents. As a result, in order to obtain a claim for an adequate amount to have their cars repaired, they should opt for zero-depreciation insurance.
4. New Drivers:People who have just learned how to drive a car are more likely to be involved in an accident since it may take them a bit longer to develop their driving skills. As a result, for such individuals, this car insurance online add-on cover is essential.

With all the information we just went through, it is evident how an add-on cover featuring zero depreciation in car insurance offers countless benefits for your car. Also, the significant savings you enjoy while filling a claim are a cherry on top! So, in order to find the ideal zero depreciation rider suitable for all your car insurance needs, make sure to check and compare policies online. Last but not the least, renewing your zero-depreciation car insurance policy on time is another important step.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.