Burst the myths around zero depreciation add-on cover

Posted on: Nov 2, 2021 | 3 mins | Written by: HDFC ERGO Team

Burst the myths around zero depreciation add-on cover

Zero depreciation is an add-on cover that offers complete coverage without factoring in the deprecating value of your vehicle. This means, if your car or any particular part of it gets damaged in an accident, you will receive the full value of replaced auto parts when you apply for a claim. In a standard car insurance policy, the claim amount is calculated on the depreciated value of your car. Whereas, in zero depreciation, there is a full claim settlement. This means that you will receive full coverage on the car parts – irrespective of its depreciating value.

Zero depreciation works well for new and luxury cars, which have expensive spare parts – and whose cost of repair or replacement is generally high. If you are extremely particular about your car, and like to keep it free of dents and bumps, then you must definitely consider this handy add-on. There often misconceptions around zero depreciation, here lets try to debunk them and understand what it actually is:

Myth 1: Multiple claims can be made if one has a zero depreciation insurance cover

There can be a limit to the number of times you can claim against this plan during a policy period. The common limit is twice but it can vary. There can be no limit as well. It’s best to go through the Policy Wordings at the time of buying the cover to know the claim limit under the Zero Depreciation Cover.

Myth 2: There are no exclusions in zero depreciation insurance

There are some exclusions under zero depreciation cover as well :

You cannot benefit from the zero depreciation cover if you do not have a valid driving license
For cars that are more than five years old, owners cannot opt for the zero depreciation add-on
You can avail the zero depreciation cover benefit if you are caught driving under the influence of intoxicants
Any compulsory deductibles mentioned in your basic car insurance plan are not covered under the zero depreciation add-on
Zero depreciation cover does not come in handy if your car experiences a breakdown or in case of normal wear and tear of your vehicle
This add-on does not provide coverage for expenses related to engine oil, clutch oil, coolant, etc.

Myth 3: Two-wheelers can’t have zero depreciation cover

The zero-depreciation rider is available for your cars as well as your bikes. You can opt for this add-on cover while purchasing or renewing yourmotor insurance online. If your claim is admissible, then you can get the benefit of the zero depreciation cover while filing a two wheeler or car insurance claim.

Myth 4: You can purchase Zero depreciation even on old cars

Most insurers don’t allow cars more than 5 years to be eligible for a zero depreciation add- on cover. So, if you want one you must take it prior to avoid any disappointment.

Myth 5: Deductible costs aren’t applicable

You have to pay the compulsory excess, which depends on the cc of your vehicle. Just like the Consumables Cost, the cost of Deductibles is also not covered under this plan. Thus, in case of a claim, you need to warrant for the Compulsory Deductible aspect of the policy. These myths will help you understand the value of zero depreciation cover. Lets understand how is zero deprecation calculated: Check out the rates for depreciation and deduce how much you might have to pay up against repairs, without a bumper-to-bumper car insurance cover.

IRDAI (Insurance Regulatory and Development Authority of India ) Approved Chart for Rate of Depreciation in Cars

Part of Car	Depreciation Rate
Batteries, rubber parts and parts made from plastic	50
Parts made from fiber	30

AGE OF CAR	RATE OF DEPRECIATION (in Percentage)
<6 months	5
>months but <1 year	15
>1 Year but < 2 years	20
> 2 Years but < 3 years	30
> 3 Years but < 4 years	40
> 4 Years but < 5 years	50
Ø5 Years	Subject to decision by policy provider

Conclusion:

Purchasing a car is a big decision. With the right kind of add-ons to your basic policy, you will be safeguarding your own pockets. A zero-depreciation is a great add-on to have on your comprehensive car insurance policy. Although it is slightly costlier than a comprehensive plan. However, this isn’t as expensive as the costs you would have to incur in case of repairs after an accident without such a cover.

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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