Cars are prized possessions for a lot of their owners. Car owners take a lot of pride and care of their cars. Right from using waxes to keep their car looking spanking new to using a higher grade of consumables for better and smoother performance. If you do not leave any stone unturned while caring for your car, why forget about zero depreciation in car insurance?
As per the law in our country, it is mandatory to buy insurance for any vehicle, if you want to drive them legally on public roads. This is the very reason that your car dealership provides you with an insurance policy. However, if you want to take the best care of your car, zero depreciation in car insurance policy might be your answer.
What is zero depreciation in car insurance?
Zero depreciation is an add-on that you can choose along with your car insurance policy. The primary aim of the add-on is to negate the effects of depreciation on your car. If your car were to meet with an accident, it is likely that you will raise a claim for the same. In such a case, the insurance provider will deduct the cost of depreciation for parts before settling the claim. It is majorly due to the age, wear, and tear of the car.
If you opt for a zero depreciation add-on, you will receive the entire amount of car components on claims. And insurance providers will not deduct any kind of depreciation amount from it. Simply put, the add-on improves the coverage of your policy and ensures that your car receives better financial protection as well.
What is depreciation in cars?
Depreciation is the decline in asset value due to natural wear and tear. When you consider your car, it is the reduction in the value of different components because of regular driving or aging. The amount of depreciation that your car accumulates, is related to its current age.
To avoid any kind of confusion, the IRDAI, or insurance regulatory and development authority of India has fixed the rate of depreciation. Here is how much your car depreciates over time.
| Car’s Age | Rate of depreciation |
| Up to 6 months old | 5% |
| 6 months to 1 year old | 15% |
| 1 year to 2 years old | 20% |
| 2 years to 3 years old | 30% |
| 3 years to 4 years old | 40% |
| 4 years to 5 years old | 50% |
Depending on the age of your car, you will have to bear the rate of depreciation during claims. Unless you opt for zero depreciation in car insurance. The add-on ensures that insurance companies do not consider depreciation during claims.
What are the benefits of a zero depreciation cover?
While buying car insurance online, you can opt for zero depreciation coverage. Here are some of the benefits that you stand to receive.
- Better claims
With a zero depreciation add-on, you will not have to worry about the rate of depreciation. In other words, the payout for claims is much higher than a policy without a zero depreciation cover.
- Complete peace of mind
Usually, insurance companies provide zero depreciation coverage till a car is 5 years old. In such cases, you have complete peace of mind. In the event of an accident, the policy will take care of all the repairs and it is one of the best coverages that your car can have.
- Better savings
On claims, depreciation does not eat into the payout. Thus, you will not have to pay the difference, which translates to much better savings.
- Value for money
Though you will end up paying a small premium to secure zero depreciation cover, the benefits far outweigh the cost.
When should you opt for zero depreciation cover?
Car owners who are inclined to give their car the best protection can opt for a zero depreciation add-on. Here are some of the conditions when opting for the add-on makes a lot of sense.
- New car
Whether you are a seasoned driver or new to driving, you always need to be cautious around new cars. And any incident in such cases can hurt a lot. Thus, opting for a zero depreciation cover is ideal for brand-new cars.
- Luxury cars
Irrespective of the age of the car, the repair bills are always on the higher side for luxury cars. The last thing that you would want is for depreciation to further add to your finances. A zero depreciation cover will make way for a much smoother ownership experience of your luxury car.
The premium for zero depreciation cover
The premium for a zero depreciation add-on primarily depends on the IDV of the car. IDV of the car is the maximum compensation that an insurance provider will offer in the event of total loss either due to an accident or theft. A car insurance policy usually considers a lot of factors such as the make and model of a car, engine capacity, location, age of the car, etc.
And zero depreciation usually amounts to up to 20% of the premium of a standard policy. While buying car insurance online, you can easily see the premium amount of zero depreciation coverage. You can even take the help of online calculators to see the impact of the add-on before deciding on it.
What are the exclusions of zero depreciation?
The standard clauses of a car insurance policy hold good for zero depreciation coverage as well. Here are some of the exceptions to the policy.
- If there is an accident due to racing.
- If there is an accident under the influence of drugs or other intoxicating substances.
- Electrical failure of the car components.
- Damages due to war and nuclear perils.
- Standard wear and tear of the parts.
- Any accessories that you have installed are not covered as a part of the coverage.
In the unfortunate event of an accident, if you proceed with a claim and realise that the insurance provider will only pay partially for the damages, it can be quite heartbreaking. As your car gets old, the amount will become significant. In such cases, a zero depreciation cover can save the day. It will ensure that you receive the entire amount as compensation, and there is no deduction of depreciation.
Conclusion
Zero depreciation in car insurance is one of the most popular add-ons and for quite a few reasons. The add-on ensures that you receive the maximum coverage for your car. And that during claims, you end up paying a minimal amount from your pockets. Even though you will end up paying a small premium for the add-on, it is the best decision that you can take for your car. Both in the short term and in the long term.
Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.
