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Limitations and Exclusions of Zero Depreciation Premium

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Zero depreciation is a popular add-on cover that comes with comprehensive car insurance. Depending on the terms of the chosen plan, you may even avail of it under bumper-to-bumper insurance too. However, you must research all the relevant car insurance terms and conditions to enjoy complete benefits.

What is the meaning of Zero Depreciation premium?

Under standard circumstances, when you file a car claim, the insurer automatically deducts the depreciation value of the vehicle concerned, based on related factors, and then settles the claim. However, when you pay a Zero Depreciation premium along with your basic car insurance premium, you receive the entire compensation amount, without considering or deducting the depreciation amount.

Zero Depreciation is an add-on protection cover you can optionally purchase along with your basic car insurance policy. Once you buy it, your insurer cannot deduct any depreciation value from the concerned vehicle during claim settlement.

How is Zero Dep car premium determined?

The amount of Zero Depreciation premium is determined after considering several relevant factors:

1. Age of the vehicle:

This is a very significant determinant in this context. Comparatively newer vehicles will attract comparatively lower premium rates than older vehicles, which are riskier.

2. Make and model of the vehicle:

The model and make of the concerned vehicle are crucial as comparatively luxurious and high-end vehicles attract higher premium payable amounts, because of pricier repair charges.

3. IDV:

The higher IDV will attract a comparatively higher premium, representing the optimum sum assured.

4. Location:

The geographical location of the concerned vehicle is also considered. The premium charges are comparatively higher in urban areas than in rural parts.

5. Riders:

Since Zero Dep cover is a rider, you have to purchase it separately with your principal plan. The cost of this rider is determined by the make, model, and age of the vehicle concerned.

6. Driving records:

If the concerned policyholder maintains a clean driving history, the premium charges are supposed to be nominal. However, if there is any history of claim settlements or poor driving records, then the premium charges tend to rise.

7. Insurer:

The premium rates vary with each insurance provider. This holds true for Zero Dep riders too, depending on their individual policies and risk assessment conditions.

8. Deductibles:

When you maintain a comparatively higher deductible limit, it reduces the overall premium payable amount. However, this increases the out-of-pocket expenses significantly.

Factors affecting Zero Dep premium

Some of the significant factors responsible for determining and calculating the Zero Depreciation premium include the following:

1. Vehicle age:

This is a very significant determinant in deciding the vehicle’s premium payable amount. The amount remains comparatively much higher in the case of newer cars and tends to lessen with age.

2. Make and model:

The vehicle’s make and model are critically considered, as more luxurious cars attract comparatively higher premiums than standard vehicles.

3. Location:

The geographical location of the concerned vehicle also plays a crucial role in determining the Zero Dep insurance payable amount. The premium rates are comparatively higher for a risky area or any area that is prone to theft or damage.

4. Driving history:

If the driving records of the concerned policyholder tend to be clean with minimal claim raise records, the premium rates are charged nominally. However, it increases otherwise.

5. Deductibles:

If the voluntary deductibles are high, then the premium amount is reduced. However, this enhances out-of-pocket expenses in the case of any damage or accident.

6. Coverage amount:

The coverage amount determines the optimum coverage amount that your chosen insurer will pay at the most under any circumstances, depending on the terms of your selected policy. When the coverage amount is higher the premium also tends to rise.

Rate of depreciation based on IDV

By opting for Zero Depreciation insurance coverage, you can avoid such deductions, ensuring optimum compensation without any depreciation charges on the replaced parts.

Who should opt for Zero Dep insurance coverage?

Although Zero Depreciation insurance comes in handy, it proves to be more helpful under certain specific circumstances. It proves to be especially helpful for the following:

1. New car owners:

Zero Dep cover is especially helpful for new car owners, where the cars are aged no more than 6 months. This is essential as the value of new cars is comparatively higher.

2. High-end car owners:

If you own a comparatively luxurious car, you must invest in Zero Dep cover as the repairing costs tend to be higher.

3. Frequent drivers:

Regular drivers might opt for getting a Zero Dep insurance coverage as the risks of minor damages increase when you drive more.

4. First-time car owners:

If you are owning a vehicle for the first time, it is especially advised to invest in Zero Dep cover as the risks of damages remain comparatively much higher. This rider will offer the necessary financial protection and coverage.

Benefits of Zero depreciation coverage insurance

From the above discussion, it is evident by now that Zero Depreciation insurance comes in very handy, especially under certain specific circumstances. Some of the most significant benefits of having this particular rider include the following:

1. Allows comprehensive coverage:

A Zero Dep cover allows comprehensive coverage to the concerned vehicle insured, allowing coverage for all the depreciable components too. In the case of any accident or damage, you will receive the entire claim amount, without any deduction of depreciation.

2. Fool-proof financial coverage:

Zero Dep insurance cover allows complete financial security to the policyholder against any accidents and damages. This proves to be especially helpful for people owing comparatively pricier and more luxurious vehicles.

3. Zero depreciation deduction:

Under standard circumstances, the insurance providers tend to deduct the applicable depreciation value during claim settlement. However, if you maintain Zero Dep cover, they cannot deduct this depreciation amount and your entire claim amount gets settled.

4. Peace of mind:

Having Zero Dep coverage ensures you retain your peace of mind as it allows comprehensive coverage of your entire financial security.

What is not covered in Zero Depreciation car insurance?

Zero Depreciation car insurance is not all-inclusive and observes certain typical exclusions irrespective of the policy of the specific insurance provider. These exclusions are standard and common for all insurance providers. These exclusions include:

1. Wear and tear:

Zero dep rider never allows coverage for any damage that occurs due to natural wear and tear of the vehicle concerned. This includes any damages that occurred due to ageing or mechanical breakdown.

2. Driving without a licence:

In case you get caught driving without proper DL, Zero Dep rider will not prove to be helpful. Similar cases are expected from intoxicated driving too.

3. Driving beyond geographical boundaries:

Zero dep cover will not allow coverage for damages incurred or accidents happening beyond the specified geographical boundaries as per the specific policy terms.

4. Illegal activities:

Zero dep rider will never allow any damage coverage due to illegal activities like participating in any unauthorized racing event or committing any crime.

5. Commercial usage:

A private vehicle must never be used for any commercial purposes. If so done, Zero Dep insurance will prove to be unfruitful.

6. Consequential loss:

Zero Dep insurance does not compensate for any consequential losses like income loss, business loss, etc. due to any accident.

Conclusion

We have carefully highlighted all the specific issues and circumstances where Zero Depreciation insurance proves to be helpful and where not. Keeping these factors in mind you can make your future moves and planning.

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

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