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

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Published on July 13, 2023. EST READ TIME: 3 minutes

With time, your vehicle ages. This is why it falls in value and you encounter the concept of depreciation in comprehensive car insurance . But what exactly is depreciation and how does the zero depreciation cover work? Let’s find out in the article below.

What is a Zero Depreciation Cover?

As mentioned above, your car begins to drop in value as it ages. This is why a brand-new car has a higher value than a two-year-old car, even when the make and model numbers are identical.

Depreciation comes into play when you make a car insurance claim. The claim amount is always calculated after factoring in the vehicle's depreciation. The IRDA predefined the depreciation slabs, and all the insurance providers in India have to adhere to them. For example, a car that is between one and two years old has a depreciation rate of 20% and one that is between four and five years old has a depreciation rate of 50%.

This is an important concept in comprehensive car insurance and can have a big impact on the final claim amount. If you want to stay covered and ensure you get the complete claim amount each time, you should consider getting zero depreciation car insurance . With this coverage in place, your car’s depreciated value will not be taken into account when you make a claim and the entire amount will be paid out to you.

How is the Rate of Depreciation Calculated for a Car?

The age of the car plays a major role in depreciation values. The older your car is, the more it will depreciate in value. This apart, the make and model number are also taken into consideration at times. An expensive, luxury car will have a greater depreciation as compared to a regular car. Check the depreciation rate slab when buying your car insurance plan to properly understand the rates and values.

What is Excluded Under 7-Year Zero Dep Cover?

If you make frequent claims on your car insurance plan or you have a very expensive car, you may consider getting zero depreciation car insurance. Under this coverage, you will not have to worry about deductions due to the depreciated value of the vehicle. However, before you go for this cover, make a note of the exclusions stated under this cover:

1. Regular wear and tear

For regular wear and tear, including mechanical breakdowns, you will not get coverage under zero depreciation in car insurance.

2. Consumables

The consumables of the car, such as the nuts & bolts, engine oil, radiant coolant, etc are not covered in a zero-depreciation cover.

3. Tyres

You cannot make a claim if your tyres are damaged or require some form of repair as tyres are not covered under the zero-depreciation protection.

4. War or nuclear damages

Any damage sustained to the vehicle due to war or nuclear activities is excluded from this coverage.

5. Total loss of vehicle

And last but not least, you cannot expect any compensation under the zero-dep cover if your car is stolen or damaged beyond repair. In that case, the insurer will compensate you based on the current invoice value of the vehicle.

Keep these factors in mind when you make a claim on your zero dep insurance for old car to ensure you get the claim without any roadblocks.

Which Factors Affect the Zero Depreciation Premium of a Car?

Apart from the age of the car, the model as well as the geographic location of your residence plays a role in the depreciation rates. If you live in an urban area, your car will have a higher rate of depreciation as compared to a rural area. This is because accidents happen more frequently in busy, urban locations.

Should I Buy a Zero Depreciation Cover for 7 Years?

Now that you know more about zero depreciation in car insurance, here are some points to help you decide whether or not you should go for the coverage:

1. Age of the car

The depreciation factor kicks in as soon as you leave the showroom with the vehicle. So, even on a new car, you will have to settle for a depreciated claim amount. Getting a long-term cover, like a 7-year zero-depreciation cover would be a good idea for you.

2. Price of the car

Expensive cars have expensive spare parts and require expensive repairs. So, if you have an expensive car, it would always be a good idea for you to invest in a 7-year zero-depreciation cover.

3. Driving experience

If you are a new and inexperienced driver, it would help you to get zero depreciation in car insurance. This is because you may need to make claims more frequently and if the depreciation rate is applied each time, you will not get a lot of compensation. Having a zero depreciation cover will therefore make it more economical for you.

Conclusion

Keeping all the points mentioned above in mind, it can be said that zero depreciation in car insurance is indeed helpful. Read the policy brochure carefully, assess the coves and exclusions and then decide whether this plan is suitable for you or not.

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

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