Here’s Why You Should Invest in a Zero Depreciation Add-on for Your Brand New Car

Posted on: Aug 13, 2024 | 3 mins | Written by: HDFC ERGO Team

Here’s Why You Should Invest in a Zero Depreciation Add-on for Your Brand New Car

Having car insurance is essential and mandatory for every car owner not only to observe the legal implications but also to ensure personal safety and the safety of your beloved four-wheeler. In the case of any accidental circumstances involving your vehicle, this insurance will act as a protective shield to face the challenges.

However, in this context, it must be mentioned that having a basic third-party plan is enough by legal standards, but it is not sufficient to ensure the safety of your vehicle. It is always advisable to opt for an elaborate comprehensive cover protection. Not only the coverage span is extensive here, but you can further extend it by adding suitable riders to it.

Some of the most popular riders include NCB Protection cover, Zero Depreciation cover, Roadside Assistance cover, etc. In this article, we will highlight the importance of having Zero Dep insurance, especially for new cars.

What is meant by depreciation?

Depreciation is the technical term used to determine the deduction of the values of your car as well as some of its components because of wear and tear. During a claim settlement, your insurance provider will allow compensation depending on the depreciated value of the concerned vehicle and its components. This implies that the policyholder needs to bridge the gap between the actual value and the depreciated value.

What is meant by Zero Depreciation in car insurance?

Zero depreciation in car insurance is a special rider that you can add with your comprehensive cover which allows you to bypass the depreciation cost. With this coverage, your insurance provider will allow full compensation for your vehicle and its components during claim settlement. This implies comparatively higher payouts and lowered OUP expenses at the same time.

How is depreciation calculated on cars?

The 2 important determinants of the depreciation of a car are natural wear and tear and the other one is age. The IRDAI has mandated the uniform age-based depreciation rates of four-wheelers to ensure easy calculation.

AGE OF THE VEHICLE	RATE OF DEPRECIATION
Below 6 months	Zero
Between 6 months and 1 year	5%
Between 1 year and 2 years	10%
Between 2 and 3 years	15%
Between 3 and 4 years	25%
Between 4 and 5 years	35%
Between 5 and 10 years	40%
Above 10 years	50%

Benefits of Zero Depreciation cover

Zero Dep cover comes in quite handy under certain specific circumstances, especially in the case of a new car insurance, which depreciates very quickly. Some of the most significant benefits of having a Zero Depreciation cover are as follows:

1. Easy claim compensation:

Comprehensive coverage with Zero Depreciation cover never involves any depreciative value reduction and qualifies for complete value settlement. In case your vehicle suffers any accidental damage, your claim settlement will not deduct the depreciation amount.

2. Cost:

Zero Dep insurance is an optional rider that needs to be purchased separately along with a comprehensive plan on paying a slightly higher additional premium. So, a comprehensive plan with zero-dep insurance will obviously cost slightly more than a standard policy.

3. Eligibility age of the concerned vehicle:

Irrespective of the age of your vehicle, you can always purchase a standard comprehensive plan. However, if you need to purchase a Zero Dep add-on, your vehicle’s age needs to be considered. It is only available for comparatively newer vehicles. It is best to add Zero Depreciation cover when you purchase new car insurance for your new vehicle. Depending on the policy of the respective insurance company, some insurers offer this rider only for vehicles aged no more than 5 years.

4. Higher payout and enhanced savings:

In the case of repairs and replacement of your vehicle, you will receive comparatively higher payouts if you have Zero Dep cover as the depreciation value won’t get deducted. This will eventually enhance your savings level too.

5. Affordable:

Adding Zero Dep insurance to your standard comprehensive insurance will prove to be very affordable, especially in the long run. The amount you pay for this rider is comparatively much lower than the standard repairing cost with the depreciated value of the vehicle, leading to much lower payouts.

Exclusions

Certain typical exclusions of Zero Dep insurance are:

• Cars older than 10 years (for certain companies, this limit is 5 years)

• Replacement cost of certain specific parts

• Mechanical breakdown costs

• Theft or loss of the vehicle

Why buy Zero Dep insurance for new car?

In the case of a new vehicle, the depreciation rate is comparatively much higher, especially in the first year. Therefore, if any mishap happens during this span, you will not suffer any depreciation value, if you maintain this cover.

The cost of each component of your vehicle is unknown to you unless it gets affected and you need to repair it. So, it is best to stay protected in the best possible manner from the beginning, especially if is a comparatively more luxurious car.

The cost of the vehicle is an important determinant to determine the cost of Zero dep coverage. However, this rate differs from one company to another. You need to make a critical comparative study of the plans offered by different companies and then choose the most suitable one at the most affordable price, without compromising on the coverage span.

Conclusion

We have highlighted how Zero dep insurance for new car can help you go a long way. It negates the depreciation value and maintains the market value of the vehicle intact. So, it is essential to add this rider to your comprehensive car insurance policy to ensure smooth coverage.

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

Why Buy Zero Depreciation Cover For a 7-Year-Old Car?

Why You Should Opt for Zero Depreciation Add-On

Benefits of Zero Depreciation in Car Insurance During Claim!

Everything About Bundled Plan for Brand New Car

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