Benefits of Zero Depreciation in Car Insurance During Claim!

Posted on: Jan 31, 2022 | | Written by:

Benefits of Zero Depreciation in Car Insurance During Claim!

Published on January 28, 2022. EST READ TIME: 3 minutes

Among the three types of car insurance—third party, own damage, and comprehensive—the last one offers the most extensive protection. Comprehensive car insurance protects you against both third-party and own damages if your car is involved in an unfortunate incident, such as an accident, natural calamity, manmade disaster, theft, and the like. However, there are some risks you can get coverage against only by purchasing an add-on cover, like a zero depreciation cover. A comprehensive car insurance policy that includes the zero depreciation add-on is known as a zero depreciation car insurance policy.

What is zero depreciation car insurance

Zero depreciation car insurance helps you steer clear of the general loss in value that the vehicle undergoes over time due to wear and tear (depreciation). If you only have a standard comprehensive car insurance policy, the insurer will deduct a certain sum from the total claim amount as depreciation on your car parts. The depreciation on different car components varies:

- Batteries and nylon, plastic, and rubber parts: 50%

- Wooden components: 5% in the first year, 10% in the second year, and so on

- Fibreglass parts: 30%

Additionally, the depreciation on your car increases by the year:

- Zero-six months: 5%

- Six months-one year: 15%

- One-two years: 20%

- Two-three years: 30%

- Three-four years: 40%

- Four-five years: 50%

If your policy lacks a zero depreciation cover, you must pay the corresponding depreciation and end up bearing the majority of the repair/replacement cost. A zero depreciation car insurance policy means that the value of your car remains unchanged from the day of its purchase, and you only need to cover a meagre amount upon raising claims. Insurers allow you to file a maximum of two zero depreciation insurance claims during a policy year.

Differences between comprehensive and zero depreciation car insurance

A comprehensive and zero depreciation car insurance policy have quite a few differences, including:

● Premium

You typically pay an additional 15% premium for a zero depreciation car insurance policy than you would for standalone comprehensive car insurance.

● Claim settlement

You get a higher claim settlement amount with a zero depreciation insurance policy than with a comprehensive one because the insurance company doesn’t deduct any depreciation on car parts in the former case.

● Age of the insured four-wheeler

When you file claims with a comprehensive car insurance policy, the age of your vehicle plays a role in the claim settlement process as the insurer deducts depreciation. However, this isn’t the case with a zero depreciation car insurance policy.

● Repair of plastic components

Zero depreciation car insurance guarantees that the value of your four-wheeler’s plastic parts will remain the same just like what it was when you purchased the vehicle. However, if you have a standalone comprehensive insurance policy, the insurer will compensate you for the repair expenses after considering the 50% depreciation on the value of plastic components.

Another point of difference between comprehensive and zero depreciation car insurance is that you can typically only purchase the latter if your four-wheeler is less than five years old. However, comprehensive car insurance provides coverage for all cars irrespective of age.

Who should you opt for zero depreciation car insurance?

If you plan to buy a new car soon, avoid getting a zero depreciation cover for your existing vehicle. Zero depreciation car insurance is best suited if you:

- Just purchased a new car

- Have a luxury/sports car

- Are an inexperienced driver

- Have a four-wheeler with expensive spare parts

- Live in an accident-prone area

All in all, a zero depreciation car insurance policy is a saviour, and you should consider buying it if your car is less than five years old. It can make things smooth and financially beneficial in case you need to register a claim.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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