Everything You Need to Know About Zero Depreciation Car Insurance

Due to regular wear and tear, the value of the car depreciates with time. The car loses its value as it ages. This also affects the claim settlement. Wondering, why? Let us help you understand. So suppose that your car meets with an accident. You would raise a claim if you have a car insurance policy in place. Now, there are chances that you may not be able to recover the complete costs of the parts which have been replaced. Confused? This will happen because the insurance company pays the repair bill only after deducting the car parts depreciation amount. It implies that you would need to pay the remaining amount of the repair bill from your pocket. Yet, you can recover the complete cost of the parts that have been replaced. This is possible only when you have a zero depreciation car insurance cover. Let us dig into understanding more about zero depreciation Car Insurance. But before that let us get the basics clear.

What is Depreciation in Car Insurance?

In simple words, depreciation in car insurance is the value decrease of the car. A common reason for it is the natural wear and tear that happens with time. It means that the older the car, the higher is going to be the depreciation. The motor insurance companies deduct the depreciation amount when settling the insurance claims which reduces the claim amount.

What is Zero Depreciation Car Insurance?

The depreciation cover is also referred to as the nil depreciation or bumper to bumper cover. The zero depreciation is an add-on cover that makes the motor insurance company settle the claim amount. It is done without taking the depreciation on the different parts of the car into contemplation. This enhances the claim amount of the policyholder and can be availed for a specified number of times during the policy term. You should also Compare Car Insurance rates and make an informed choice. *Standard T&C apply

How is the Depreciation Calculated?

IRDAI has set depreciation rates for the cars plying on Indian roads. Here is a rundown of the depreciation rates based on which the depreciation of the car is calculated:

• For fiber glass components: 30%
• Nylon, rubber, batteries, and plastic parts: 50%
• For wooden parts: In the first year- 5%, second year- 10% and so forth

The table below shows the percentage of depreciation in vehicles and metallic parts:

Vehicle Age	Depreciation Percentage
Not exceeding 06 months	5%
Exceeding 06 months but not 01 year	15%
Exceeding 01 year but not 02 years	20%
Exceeding 02 years but not 03 years	30%
Exceeding 03 years but not 04 years	40%
Exceeding 04 years but not 05 years	50%

For Metallic Parts

Vehicle Age	Depreciation Percentage Value
Below 06 months	Nil
Exceeding 06 months but not 01 year	5%
Exceeding 01 year but not 02 years	10%
Exceeding 02 years but not 03 years	15%
Exceeding 03 years but not 04 years	25%
Exceeding 04 years but not 05 years	35%
Exceeding 05 years but not 10 years	40%
More than 10 years	05

*Standard T&C apply

Difference between comprehensive car insurance policy and a car insurance policy with zero dep cover

Points of Difference	Comprehensive Car Insurance	Policy with Zero Dep
Coverage	A comprehensive car insurance policy offers the following coverages: Loss or damage to your car due to natural calamities, Loss or damage to your car against unplanned activities, Personal Accident Cover, Third Party Legal Liability	A comprehensive car insurance policy with a zero depreciation cover offers all the coverages along with the coverage for the repair/replacement of your damaged car (insured) parts due to collision without considering their depreciation cost.
Premium	The premium for comprehensive car insurance is slightly less as compared to a policy with zero dep cover.	As this is an add-on cover that has to be purchased over and above the comprehensive car insurance cover, the premium to be paid is slightly higher than a normal policy.
Number of Claims	You can make multiple claims under your comprehensive car insurance policy up to the IDV of your car.	You can make a maximum of 2 claims in your policy year if you buy a zero dep cover.
Out of pocket expenses	You might have to bear a large sum on your own owing to the mandatory deductions as well as depreciation cost of your car parts.	The out of pocket expenses are significantly reduced as the depreciation cost is paid by your insurer.
Age of the car	A comprehensive car insurance cover can be purchased for a new as well as old car.	A zero depreciation cover can only be purchased for newer cars up to 5 years of age.

Important Things to Remember- Zero Depreciation Car Insurance

1. The zero depreciation add-on cover applies only to cars that are less than 05 years old.
2. It covers the cost of cars part depreciation during insurance claims and not the compulsory deductibles
3. In case the car is more than 05 years old, the zero depreciation cover cannot be chosen.

How does zero depreciation cover affect the premium of your car insurance policy?

Your car insurance prices depends on the following factors:

1. IDV (Insured’s Declared Value) of the car
2. NCB (No Claim Bonus), if applicable
3. Liability premium of your car, which can vary every year
4. Cubic capacity (cc) of the vehicle
5. Geographical zone
6. Add-on covers (Optional)
7. Accessories that you have used in your car (Optional)

Benefits of Zero Depreciation Car Insurance Cover

1. A zero depreciation cover saves you from paying a hefty amount towards the repair/replacement of the parts of your car, following an accident, which you have to pay otherwise.
2. With a zero depreciation cover, you get maximum settlement of your claim amount. You just have to bear the cost of mandatory deduction.
3. A zero depreciation provides coverage to your car over and above the coverage provided by your existing car insurance policy.
4. A nil depreciation cover helps to increase your savings when you file a car insurance claim.

If you haven’t purchased a zero depreciation cover while buying a policy, you can avail it during car insurance renewal.

The Bottom Line

The key role of zero depreciation cover during claims is to save money that otherwise you would end up paying. So, if you plan to buy car insurance online, consider choosing a zero depreciation cover and adding it to the base plan. Choosing the right add-ons for your vehicle is extremely important. And if you already have an existing car insurance policy and the car is less than 05 years old, even then opt for a zero depreciation car insurance cover. Steps like these help you save money while making insurance claims.   Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.