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Can a Zero Depreciation Car Insurance Policy Benefits You?

19 November 2021
4 minutes

The value of a car depreciates over time due to regular wear and tear. As a result, this devaluation impacts the claim settlement process and hinders one from recovering the cost of repairs and replacements. However, car owners can avoid such a circumstance by opting for zero depreciation car insurance. 

So, let’s understand the ins and outs of this insurance plan.

What Is a Zero Depreciation Car Insurance Policy?

It is a comprehensive car insurance plan that includes ‘zero depreciation’ as an add-on cover. Every motor insurance policy accounts for depreciation of the vehicle, even if the vehicle is only three months old. So if this cover opted, insurers will leave out the depreciation at the time of claim. Thereby offering complete cover to policyholders. 

For instance, if an individual’s car undergoes damages as a result of a collision, his/her insurer will not deduct any sum from the claim amount under depreciation. The insurance provider will, therefore, bear the total expenses of replacements. 

What Does Zero Depreciation Car Insurance Cover?

A standalone car insurance policy offers comprehensive coverage, albeit with certain limitations. This is where a zero depreciation car insurance plan proves to be resourceful as it covers all the damage-related costs for rubber, metallic, and fibre parts without deducting depreciation. 

That said, such a policy usually does not cover engine damage caused by oil leakage or water ingression. Moreover, consumables, oil changes, and mechanical breakdowns are not covered under this plan. So, one cannot make claims related to engine mounts, brake pads, wipers, batteries, and tyres.

Zero-depreciation is also known as bumper-to-bumper insurance.

How Many Times Zero Depreciation Insurance Can Be Claimed?

Generally, there is a limit on the number of claims that policyholders can make in a year. However, this varies from one insurance provider to another. For instance, some insurance companies do not levy any restriction on the number of claims that one can raise. Therefore, it is wise for prospective policyholders to check for such restrictions before opting for a zero depreciation car insurance policy. 

What Is the Difference Between Comprehensive and Zero Depreciation Car Insurance?

There are several key differences between a zero depreciation car insurance and a comprehensive one. The table below highlights some of these differences:

Basis of Differentiation Comprehensive Car Insurance Plan Zero Depreciation Car Insurance Policy
Meaning A comprehensive car insurance plan offers coverage for a car’s own damages as well as third-party damages. Moreover, this type of insurance is customisable for a broader coverage. A zero depreciation car insurance plan is an optional add-on that one can choose alongside a standalone policy. 
Cost of Depreciation In this type of insurance, an insured pays for the cost of depreciation for his/her car’s parts while initiating a claim.  As insurers do not consider a car’s depreciation during claims, policyholders are not liable to bear the cost of depreciation of their car’s parts.
Premium  Premiums for this kind of insurance are lower than of a comprehensive policy with add-ons. When opting for this add-on, a comprehensive plan’s premium increases, usually by about 15%.
Savings A comprehensive car insurance plan allows one to save when he/she does not opt for any add-on alongside the policy.  Although it comes with a slightly higher premium, individuals’ can save more in the long run as they need not bear the depreciation costs during claims. As a result, one’s long-term savings can increase with such a plan.

Can I Get Zero Depreciation Car Insurance After 5 Years?

At this point, it is imperative to note that zero depreciation add-on cover is only applicable for cars that are less than 5 years old. Therefore, this car insurance plan, unfortunately, does not extend coverage to car beyond the age of 5 years. Likewise, zero depreciation car insurance after 7 years India is also not permissible.

Points to Remember about Zero Depreciation Car Insurance

If one is planning to purchase this type of insurance, he/she should keep a few points in mind, such as the following:

  • As mentioned earlier, a car should be new or less than 5 years old to be applicable.
  • Owners of commercial vehicles cannot opt for this type of plan as it is restricted to privately-owned cars. 
  • Zero depreciation car insurance only extends coverage against the depreciation costs of a car’s parts. Therefore, such plans do not cover for one’s compulsory deductibles.

Let’s say a policyholder, Mr. Sharma, has a total payable claim amount of Rs. 30,000. However, the total cost of depreciation of his car’s part is Rs. 8,000. So, if he has a zero depreciation car insurance plan, he will receive the entire sum of Rs. 30,000 as his claim amount. On the other hand, without such a plan, his insurer will count in the depreciation cost and pay him only Rs. 22,000. 

Also read: Everything You Should Know about Insurance Premium

Who Should Opt for a Zero Depreciation Cover?

As it enhances one’s insurance coverage, this add-on is ideal for any individual with a car that is up to 5 years old. Moreover, as stated above, car owners can go for zero depreciation car insurance if they have recently purchased a new car, as well. Given that buying a car is quite an investment, spending a bit more on the right add-ons, such as zero depreciation cover, will pave the way for better benefits in the long haul.

Disclaimer: The views expressed in this post are that of the author and not those of Groww

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