Zero Depreciation Car Insurance

Like every other commodity, your car is also subject to depreciation, i.e., the devaluation with time due to wear and tear. The onus of bearing the depreciation liability originally rests with the car owner and not the insurance provider. Thus, at the time of a claim settlement, the amount of depreciation applicable on your car and its parts get deducted from the compensation amount thereby reducing it. This is where the Zero Depreciation add-on cover comes in handy.

What is Nil/Zero Depreciation Car Insurance?

Zero Dep Car Insurance - A zero depreciation add-on cover, also known as Nil Depreciation and Bumper-to-Bumper cover, is a popular car insurance add-on cover which is most commonly opted by car owners along with their comprehensive car insurance policy. It shifts the liability of bearing the depreciation of your car and its parts from you to the insurance company against a nominal premium. Sometimes, even a single claim helps you recover the entire zero depreciation cover's premium amount.

A zero depreciation add-on covers all parts of your car at 100% except tyres, tubes and batteries which are covered at 50%. Generally, insurers allow 2 zero depreciation claims during the policy tenure, however, there are some insurers like IFFCO Tokio who allow you to make an unlimited number of zero depreciation claims during the tenure of your car insurance policy.

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 its 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 an amateur driver but also 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.

Depreciation Rates for Various Parts With and Without Zero Depreciation Cover

Part of Car	Depreciation Rate Without Zero Depreciation Cover	Depreciation Rate With Zero Depreciation Cover
Paint work/Rubber/Nylon /Plastic parts, tires and tubes, batteries and airbags parts	100%	50%
Fibre glass parts	100%	30%
Glass parts	100%	Nil

Following is the impact of zero depreciation / nil depreciation / bumper to bumper insurance.

Age of Car	Depreciation Rate Without Zero Depreciation Cover	Depreciation Rate With Zero Depreciation Cover
Under 6 months	Nil	0%
6 months to 1 year	5%	0%
1-2 years	10%	0%
2-3 years	15%	0%
3-4 years	25%	0%
4-5 years	35%	0%
5-10 years	40%	0%
Above 10 years	50%	0%

Part of Car	Depreciation Rate Without Zero Depreciation Cover	Depreciation Rate With Zero Depreciation Cover
Paint work / Rubber / nylon / plastic parts, tires and tubes, batteries and airbags parts	50%	0%
Fibre glass parts	30%	0%
Glass parts	Nil	0%

What is the Cost of A Zero Depreciation Cover? What Makes it Worth the Price?

In most cases, the zero depreciation cover costs approximately 15%of the car insurance premium. 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.

Things to Keep in Mind About the Zero Depreciation Add-on Cover?

These are a few things to keep in mind when purchasing a 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.