If you are buying car insurance in India for the first time, you may be baffled by the various types of insurance coverages available in the market.
Besides the necessary car insurance policies like third party liability and comprehensive car insurance, you can opt for several top up covers or riders that can help you cover a wide variety of risks. Some of the top up covers include –
- No Claim Bonus (NCB) Protection
- Loss of Personal Belongings
- Quick Road Assistance
- Return to Invoice
- Key Replacement
The zero depreciation car insurance cover is one of the most sought after motor insurance add-on covers. For a little extra premium, it offers complete coverage without the deduction of depreciation. In simple terms, if your car gets damaged following an accident, you will receive the cost of the vehicle at the time of claim settlement.
However, in this article, we will be discussing in detail what zero depreciation car insurance is and how is it different from a basic car insurance plan. But first, let us understand what depreciation is.
What Is Depreciation?
Depreciation is nothing but a decrease in the value of assets over the course of time. For instance, a new car model will be priced at a higher rate than its older versions. Likewise, the depreciation factors are associated with all the materials like glass, plastic, the metal body of the car, etc. and each of these materials will have a different rate of depreciation.
What Is Zero Depreciation Car Insurance?
As the name suggests, this add-on coverage does not factor in depreciation from the coverage, thus providing you with complete protection. So, in case your car is damaged in an accident, your insurer will compensate you for the full amount without considering the depreciation factor. In simple terms, a zero depreciation car insurance offers complete coverage on all parts (excluding the tyres and batteries) of your vehicle.
How Depreciation Affects Car Insurance Claims?
Depreciation is the loss of value of an asset due to factors such as age, wear, and tear, and obsolescence. As cars are depreciating assets, they tend to lose their value over time. For example, a new car will cost more than an older one only because the cost of depreciation is deducted from the total value of the vehicle.
A standard car insurance policy only provides coverage for the insured declared value (IDV) of your car. The IDV is mainly derived after subtracting depreciation from the total value of your car. The IDV of your car will eventually decrease with time, thereby reducing the total amount you can claim from your policy/company. Therefore, a standard car insurance policy only covers the depreciated cost of the car. The remaining difference will need to be borne by you (the policyholder).
However, when you opt for a zero depreciation car insurance, you can get maximum reimbursement during the time of claim settlement as, in this case, the depreciation is not taken into consideration. If your car is damaged in an accident even after a few years post purchasing a zero dep cover, you will receive a claim amount close to the original cost of your car. Hence, by taking it, you get maximum reimbursement at the time of the claim.
How Is Depreciation Calculated?
Consider the following table to understand the rate of depreciation-
|Age Of The Car||Rate Of Depreciation|
|6 months – 1 year||5%|
|1 year – 2 years||10%|
|2 years – 3 years||15%|
|3 years – 4 years||25%|
|4 years – 5 years||35%|
|5 years – 10 years||40%|
|More than 10 years||50%|
Zero Depreciation Cover vs. Regular Car Insurance Plan
The difference between zero depreciation cover and regular car insurance is as follows-
|ZERO DEPRECIATION COVER||REGULAR CAR INSURANCE|
|Claim Settlement||You receive full compensation on the claim made||The claim amount is based on the current value of the car and the depreciation factor|
|Premium Rate||High||Comparatively low|
|Repairing Expense And Plastic Fiber||Your insurer will bear all the expenses||You will have to pay it from your pocket|
|Age Of The Car||Generally, only covers new cars||It can be taken for vehicles that are more than three years old|
Factors to Consider Before Seeking Zero Depreciation Cover
It is worthwhile that you take into consideration the following factors before opting for zero depreciation car insurance –
Car insurance plans that come along with zero depreciation cover will have high premiums. It is because it offers full protection without factoring in depreciation, so the premiums charged are relatively high.
Number of Claims:
Most insurers limit the number of claims you can make in a single year. Hence, you must check this number before choosing the policy.
Available for New Cars:
Zero depreciation cover is generally available only for new cars. Practically speaking, it is not a very cost-effective option to choose this coverage is your car is five years old or more.
Benefits of a Zero Depreciation Car Insurance
- It helps reduce out-of-pocket expenses since depreciation cost is not considered while filing a claim settlement.
- Most of the claims regarding insured parts are settled without deducting the depreciation amount.
- A Zero Depreciation Car Cover adds more value to the basic coverage and makes your investment worthwhile.
If you want to save yourself from depreciation costs in the future, you can opt for the Depreciation Shield top up cover by Finserv MARKETS and get the maximum benefit out of your car insurance policy.
Who Should Buy Zero Depreciation Cover?
A Zero Depreciation cover is best for:-
- New car owners
- Luxury car owners
- New / Inexperienced drivers
- People living in accident-prone areas
- Cars with expensive spare parts
Now that you know more about add-on covers and especially, the Zero Depreciation cover, log on to Finserv MARKETS and buy or renew car insurance online today!
Another popular add on cover that you must read about is roadside assistance car insurance cover .
Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we works towards fulfilling all your personal and financial needs . What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.