Zero Depreciation Car Insurance

What is Depreciation Mean?

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

Impact of Zero Depreciation on Car Insurance

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.

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FAQs About Zero Depreciation Car Insurance

A zero depreciation insurance is also known as a nil depreciation insurance. It is a kind of insurance plan that provides total coverage without deducting the depreciation value of the car. It simply means that in case your insured vehicle gets damaged in the accident, the insurance provider would compensate you with the entire cost.

Zero depreciation is an add-on cover under which the claim amount is paid by the insurance company without any deduction of depreciation. Most of the car insurance companies allow up to 2 claims under zero depreciation add-on. However, IFFCO Tokio General Insurance Company, Royal Sundaram General Insurance, and New India Assurance allow unlimited zero depreciation claims.

A zero depreciation add-on cover helps the policyholder in reducing the premium payable towards car insurance plan significantly.The expenses related to depreciation of car components and voluntary deductibles is paid by the policyholder during the claim settlement. However, with a zero depreciation add-on cover, a policyholder is entitled to receive the full sum assured amount. This means that depreciation on car components will not get deducted (except the tyres and tubes). It is highly recommended for all the new car owners to buy a zero depreciation add-on cover.

Insured declared value is basically the sum assured value that the insured individual would receive in case of complete loss or theft of the insured vehicle. It simply refers to the present market value of the insured car after subtracting the registration cost and depreciation value of the car components.

This depends from insurance provider to insurance provider. Generally, insurance companies allow zero depreciation cover for new cars that are not more than 5 years old. However, in case your car is more than 5 years old, you should talk to your insurance provider for the next suitable course of action. Moreover, there are certain insurance companies that offer zero depreciation cover for cars that are more than 5 years old but only through offline sources.

Although, a zero depreciation cover is extremely beneficial for new cars yet note that it may limit the number of claims you are eligible to make in a year. This is because your vehicle gets depreciated once in a year. It simply means that without this add-on cover, your insurance provider may consider depreciation. However, it is advised to drive safely and prevent yourself from making any unnecessary claims. Therefore, most of the insurance companies have set a specific limit from the number of times a claim can be raised. So, before purchasing the cover, consult with your insurance company regarding the same.

The three main factors that affect the premium paid towards your zero depreciation car insurance policy includes car's Age, car's Model and location in which you are based.

The main difference is that comprehensive car insurance with zero depreciation is slightly expensive than the standard car insurance policy without zero depreciation. Moreover, the claim amount is higher in the case of comprehensive car insurance with zero depreciation since there is no deduction of depreciation. Click on zero-depreciation cover-versus-comprehensive to know the distinction between the two.

Generally, a policyholder can avail zero depreciation cover only for the new cars. For this the insurance providers set a certain age limit, wherein if your car happens to cross the age limit specified by the insurer, then you won't be allowed to buy zero depreciation cover for your car.

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