What is Zero/Nil Depreciation in Car Insurance

To put the meaning of zero depreciation in car insurance simply, it is a type of add-on cover (or rider) that you can choose to buy at the time of purchasing your car insurance policy. This cover makes sure that your insurer will not factor in any depreciation while calculating your insurance claim. Depreciation here refers to the decrease in the value of a vehicle over time. Depreciation may also apply to the components used in a car.

If you have the zero depreciation cover active, your insurer is liable to provide you with comprehensive compensation that doesn’t take into account the depreciation rate from your claim. Let’s take a closer look at the zero depreciation add-on cover below: 

Benefits of Zero Depreciation Cover in Car Insurance 

If you have opted in for a zero-depreciation add-on cover with your car insurance policy, you can enjoy the following benefits: 

• Get Higher Claim Settlements

With a zero dep insurance plan, car owners benefit from having their insured claims settled without the depreciation value being deducted.

• Peace of Mind

Zero depreciation car insurance coverage allows you to enhance the basic coverage your plan provides and makes for a prudent investment. With such an add-on, you can rest easy knowing that the insurer has your back in the event that you have an accident involving your car.

• Greater Resale Value

Zero depreciation insurance for a car means it acquires a greater resale value as long as this add-on rider is active. 

Zero Depreciation in Car Insurance vs Comprehensive Coverage 

Here are the main differences between zero depreciation cover and comprehensive car insurance: 

How to Calculate Depreciation of a Car

The depreciation of car parts is calculated as per the car’s age, as seen in the table given below: 

Inclusions Under Zero Depreciation Cover 

This add-on provides coverage against loss of value due to depreciation on the following car components: 

• All fibre parts 

• All metal parts 

• All rubber parts

Zero depreciation add-on cover is applicable for cars between the ages of 0-5 years. 

Exclusions Under Zero Depreciation Cover 

A zero depreciation add-on will not cover the following: 

• Engine damage caused due to water ingression/oil leakage. 

• Mechanical breakdown of the car. 

• Cost of replacing consumables. 

Impact of Zero Depreciation on Car Insurance Premiums 

When you choose to buy a zero depreciation add-on cover with your car plan, the cost of the add-on will be added to your total car insurance premium costs. As a result, the premiums will be higher.

Here are some other important factors that also affect car insurance premium costs: 

• Age of the Vehicle Under Consideration

The newer a vehicle is, the more valuable it is. On the other hand, the older a vehicle is, the less valuable it may be. 

• Make and Model of the Vehicle

The make and model of the vehicle under consideration impact the overall cost of the premium tethered to a comprehensive car insurance policy.

• Residential Area

The location in which you purchase and drive your vehicle can impact what your premium (that includes zero depreciation cover) amounts to. Areas that are more susceptible to natural disasters, for instance, may have higher premiums tethered to them.

• Price of the Vehicle

The actual cost of the car also affects insurance premiums (including zero depreciation cover) as the price of the car is considered when determining the Insured Declared Value (IDV) of a vehicle. 

How Much Will a Zero Depreciation Add-on Cover Cost

As this is an add-on rider that can be bought on top of a comprehensive car insurance plan, the cost for it ordinarily ranges around 10% to 15% above the primary premium amount. This cover is worth purchasing and is frequently endorsed by insurance experts. This is because by paying a modest sum of money, you are entitled to financial protection for your vehicle against depreciation.

When is Zero Depreciation Claim Null and Void

The zero depreciation car insurance add-on cover is excluded under the following considerations:

• If you happen to drive the insured vehicle without a valid licence and damage the car in any capacity, coverage will not be provided for the same.

• Vehicles that are over five years old aren’t eligible to avail this rider because much of the original value has declined by this point in time.

• If you have an accident while driving your insured vehicle under the influence of intoxicants, zero depreciation cover will not be included.

• Compulsory deductibles that may be included with a base car insurance plan are not covered by zero depreciation car insurance.

• Additional costs associated with the purchase of coolants, brake oil, and engine oil are not covered under zero depreciation cover.

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