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Zero Depreciation Car Insurance Research Team | Posted On Tuesday, September 25,2018, 01:17 PM

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Zero Depreciation Car Insurance



You must be well familiar with the term, “depreciation”. Depreciation is the decrease in the value of assets with time. You have bought a brand new car. Will the value of this car remain same with time? Definitely Not. As time passes, the value of the car reduces called depreciation.

Let’s understand what zero depreciation car insurance is. Your car is covered with a normal car insurance plan and if it’s stolen or damaged in an accident, you are compensated. But there’s a catch. If your car is damaged in an accident, you cannot claim 100% reimbursement on expenses for replacing damaged car parts. You can only claim residual value which is the remaining value of the car parts, after deducting depreciation.

Difficult to understand? I’ll explain. Let’s say your damaged car part costs Rs 6,000. The applicable depreciation rate is 50%. You will only get payout for [email protected] 50% = Rs 3000. How is zero depreciation car insurance different? Let’s find out.

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Zero Depreciation Car Insurance

Zero depreciation car insurance gives complete coverage, without considering the costs of depreciation. If your car is damaged in an accident, the insurer bears the entire cost.

Let’s take a look at depreciation on various car parts:

  • Its 50% for car parts which have high wear and tear like the plastic and rubber parts of the car, tyres, tubes and so on.
  • Its 30% for fibre glass parts.
  • Its 0-50% for metallic parts.

1Why zero depreciation car insurance?

Don’t you want to be compensated for the entire cost of the damaged car parts in an accident? Zero depreciation car insurance does just that. Plastic parts are highly prone to damage in an accident. High depreciation makes sure, claims are not high.  With Zero depreciation car insurance, you get the full claim on the value of replaced car parts, without any deductions for depreciation.

2. Do you have to pay additional premium for zero depreciation car insurance?

Yes, you have to pay an additional premium for zero depreciation car insurance. Premiums paid for car insurance depend mainly on the Insured Declared Value popularly called IDV. This is nothing but the money you get on the total loss of the car. if it’s stolen or suffers irreparable damage.

Premiums for car insurance are decided based on the car model, age of the vehicle or the location. (Metro cities and so on). Premiums on zero depreciation car insurance could be 15-20% higher than a normal car insurance plan.

3. Benefits of zero depreciation car insurance

  • You have bought a brand new car:

The moment you drive the car out of the showroom, it loses value as depreciation comes into play. If the plastic parts get damaged, you can claim only a fraction of the costs with a normal car insurance plan. With zero depreciation car insurance, you are compensated for the entire cost of the plastic parts.

  • You own a luxury car

Damaging a luxury car is a costly affair. Make sure you have zero depreciation car insurance which helps you claim the full value on damaged parts.

  • If you are a new driver or live in an accident prone area

A new driver must avail a zero depreciation car insurance plan to cover for costly damages. Avail zero depreciation car insurance if you reside in an accident prone area.

4. Car Insurance vs Zero depreciation car insurance

  • Claims are settled based on the cost of the car, factoring depreciation in normal car insurance. Claim settlement without considering depreciation in zero depreciation car insurance.
  • Premiums are higher in zero depreciation car insurance.
  • In case of repairs/damage to plastic parts, zero depreciation car insurance gives the maximum amount.
  • Zero depreciation car insurance usually covers cars up to 5 years.

5. Factors which affect Zero depreciation car insurance

  • The age of the car.
  • Car Model
  • The location where you reside.

6. Claims on Zero depreciation car insurance

If you own a luxury car or are a new driver, make sure to avail Zero depreciation car insurance. But, don’t go dashing your car around. A zero depreciation car insurance plan, limits the number of claims made each year. Your insurer would not be happy paying claims on damaged parts several times each year, irrespective of depreciation.

Check the claim settlement policy on zero depreciation car insurance before availing the plan vis-à-vis limits on claims. Policy terms and conditions vary across insurers.

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