1. Home
2. Blogs

How can a Nil Depreciation Car Insurance Policy Help you with your Claim?

• 
• 
• 
• 0
• 0

Published on February 24, 2022. EST READ TIME: 3 minutes

When you buy a comprehensive car insurance policy, you get the option to buy some add-on covers. Add-on covers, as the name suggests, are a list of extra covers which enhance the scope of coverage. Also known as riders, you have to buy the add-ons at an added cost. One of the most popular car insurance riders is the nil depreciation car insurancerider. Take a look at this article to understand what exactly is nil depreciation car insurance rider and how it can be of use to you.

What is a Nil Depreciation Car Insurance Policy?

While the nil depreciation cover is mainly taken as a car insurance rider, you can also purchase a stand-alone nil depreciation car insurance policy. Also known as the zero de cover or the bumper to bumper cover, the nil depreciation cover nullifies the aspect of depreciation in car insurance. Depreciation kicks in when the car begins to get old. With time, there is wear and tear in the car and its parts. So, the value of the vehicle begins to drop. When you make an insurance claim, the insurance provider calculates the depreciation and then offers a payout that is lower than the actual claim amount. When you have a nil depreciation cover, the element of depreciation is ignored and you get the full claim amount each and every time.

Difference between a Nil Depreciation and a Regular Car Insurance Policy?

There are some very basic differences between a nil depreciation and a regular car plan. They are:

1. Claim settlement

As stated, you can get the full claim amount when a zero depreciation cover is in place. However, in a comprehensive car insurance policy without a nil depreciation cover, you will only get a part of the claim amount after the depreciation value is deducted.

2. Cost

The cost of a nil depreciation car insurance cover is higher than that of a comprehensive car insurance policy. This is because the insurer takes on a higher risk when offering you the zero depreciation cover.

3. Expenses related to plastic fibre

The depreciation applies mainly to the plastic and fibre components of the car. So, when there is a claim related to these parts, the insurance provider bears a majority of the costs at the time of a claim when you have a nil depreciation car insurance policy. However, in a regular car insurance policy, the policyholder has to bear the majority of the costs, as the depreciated claim amount will be paid out.

4. Age of the vehicle

You can get the nil depreciation car insurance plans for vehicles that are five years old or newer. However, comprehensive car insurance plans can be taken for cars as old as 15 years of age.

Benefits of a Nil Depreciation Car Insurance Policy

Here are the top benefits of a nil depreciation car insurance policy:

1. Financial gain

The biggest benefit here is that you get a high claim amount. Depreciation eats into your car’s value and so in a regular cover, the claim amount is low. You end up spending a lot of money out of your own pocket. But with the zero depreciation cover, you hardly end up spending anything as the entire claim amount is given to you.

2. Faster claim settlement

Often, car insurance claims are held up due to depreciation-related calculations and checks. With nil depreciation car insurance in place, this challenge is eliminated and you get the claim at a faster pace.

3. Very handy for new drivers

The zero depreciation cover is especially handy for novice drivers who may get into accidents with their new expensive cars being able to get the full claim amount helps massively at times.

Factors to consider when buying a Nil Depreciation Car Insurance Policy

While the nil depreciation car insurance cover is definitely advantageous, there are some important factors to remember before you get the coverage:

1. Age of the car

You can only get the zero depreciation cover if your car is five years of age or newer. Some insurers also limit the age to three years.

2. Premium amount

You will have to pay a higher premium when you opt for this cover. So make a budget and see whether or not the costs are affordable for you.

3. Make and model of the car

Zero depreciation covers are especially useful for expensive and luxury cars that have very expensive parts. If you have a second-hand hatchback, you may not benefit a lot from the zero depreciation cover.

Calculation of Depreciation Rate

	Rate of depreciation
Rubber, nylon and plastic parts	50%
Batteries of the car	50%
Fibreglass parts	30%
Metallic and wooden parts	This is calculated on a yearly basis, and increases as the car keeps ageing.

Exclusions under a Nil Depreciation Car Insurance Policy

Though the list of exclusion vary from insurer to insurer, there are some standard exclusions available in all zero depreciation plans. They include:

● No coverage for cars older than 5 years

● The coverage is not extended if the car has travelled more than the specified kilometres

● No coverage for engine damage

● No coverage for damages due to wear and tear to the tires, clutch plates, etc

● No coverage for mechanical breakdowns

Conclusion

As you can clearly see from the points mentioned above, there are several benefits you get from a nil depreciation car insurance cover. You can choose to get a stand-alone zero depreciation plan or get it as an add-on cover with your comprehensive plan. Assess your needs, make a budget and then choose the correct coverage to keep your vehicle adequately protected.

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

RELATED ARTICLES

Burst the myths around zero depreciation add-on cover

All you need to know about zero depreciation car insurance

4 factors to Know about Zero Depreciation Insurance for Car

---

• 
• 
• 
•