Bajaj Allianz, one of the leading insurance companies in the country, offers a comprehensive car insurance policy. The add-on covers offered with this policy are also quite innovative and useful.
Cars are prone to depreciation with age. The normal wear and tear with use and the depreciation resulting from aging lead to decrease in the Insured Declared Value (IDV) of the vehicle. Car insurance companies consider the IDV of the vehicle when they make payments towards a claim. So, if you have a relatively old car you will have to bear a considerable part of the claim amount at the time of a claim settlement.
Why Should You Buy Bajaj Allianz Zero Depreciation Cover?
- By paying an extra/higher premium, you can enjoy zero depreciation coverage, an additional benefit (add-on).
- Usually a standard/basic car insurance policy doesn’t include zero depreciation.
- During insurance claims, an insurer always calculates and applies the depreciation rate to arrive at the amount payable (with reference to the damaged part of the car) for settling the claim.
- The difference in cost between the market price of the new part and depreciated part needs to be borne by the insured/car owner.
- If your vehicle is equipped with zero depreciation add-on insurance cover, during the settlement of a claim, the insurance company pays the entire claim amount without accounting for the vehicle’s depreciation.
- Zero deprecation ensures hassle-free claim settlement and complete peace of mind.
- For a brand new car, buying this add-on is definitely a worthwhile investment as long as paying the additional premium doesn’t pinch your budget.
Bajaj Allianz Car Insurance Depreciation Rates
Depreciation in cars can be classified into two categories:
- Depreciation of car parts - Applicable for partial loss claims
The rate of depreciation of car parts is assessed uniformly across the board by all car insurance companies. The standard depreciation rates followed in the industry are as listed below:
- For a paint job, depreciation of 50% is applicable on the material costs involved. If the service centre charges a consolidated amount for the paint job, the insurer considers the depreciation as 25% of the total cost.
- For all plastic/nylon and rubber parts including tubes, tyres, air bags, and batteries, depreciation of 50% is considered.
- 30% depreciation is applicable for fibreglass parts.
- For parts that are made of glass, the depreciation is considered as nil.
- The depreciation rate for all other parts, including wooden parts, are as indicated in the table below:
|Age of the car||Percentage depreciation|
|Below 6 months||nil|
|6 months to 1 year||5%|
|1 year to 2 years||10%|
|2 years to 3 years||15%|
|3 years to 4 years||25%|
|4 years to 5 years||35%|
|5 years to 10 years||40%|
|More than 10 years||50%|
So consider a scenario in which a fibreglass car part that costs Rs.10,000 is replaced during the repair work on your car following an accident. The insurance provider only pays 70% of the replacement cost, i.e., Rs.7,000. This implies that you will have to pay the remaining Rs.3,000 from your pocket.
Consider another example in which a paint job was done on the car. If the cost of the paint work was Rs.3,000, you will have to pay Rs.1,500 because the insurer only bears 50% of the cost.
The Insured Declared (IDV) of a car is determined on the basis of its depreciation with age. The depreciation of a vehicle for the calculation of IDV is as detailed below:
|Age of the vehicle||Depreciation for the calculation of IDV (Percentage)|
|Less than 6 months||5%|
|More than 6 months but not exceeding 1 year||15%|
|More than 1 year but not exceeding 2 years||20%|
|More than 2 years but not exceeding 3 years||30%|
|More than 3 years but not exceeding 4 years||40%|
|More than 4 years but not exceeding 5 years||50%|
|More than 5 years||The IDV is agreed upon jointly by the insurer and the car owner|
Some Important Aspects of Bajaj Allianz Zero Depreciation Cover
- Applicable only on new cars
- Compulsory excess
- Restriction on number of claims
Usually, only new cars can avail the zero depreciation add-on cover. A certain age limit is given by the insurer, with regards to the same. If your car is older than the specified limit, it is not eligible to enjoy this add-on.
The coverage offered is not 100%, always. Some insurers don’t cover normal wear and tear and mechanical breakdown under this add-on. Every customer, irrespective of whether he/she has taken a zero depreciation rider has to pay a mandatory policy excess. This is known as compulsory excess.
A zero depreciation add-on cover may limit the number of claims that can be made annually. Again, this may vary from one insurance company to another. From the perspective of the insurer, setting such a limit is crucial as it helps in bringing down the incidence of claims to a large extent. If the insurer had no such restriction, customers may even raise claims for small scratches and dents.
Your car is vulnerable to a lot of threats, damages and unforeseen circumstances. A comprehensive car insurance policy protects your car from every possible danger. Strengthen this protection by choosing from a wide range of add-on covers. Give your vehicle the attention and care it deserves by choosing the right car insurance policy and add-on covers.
How is the Premium for a Zero Depreciation Cover Calculated?
Each car insurance company has a standard set of procedures using which it determines the premium for a zero depreciation cover. But the following factors are taken into consideration by all insurance providers when they calculate the premium:
- The age of the car
- The make and model of the vehicle
- The location where the policyholder resides and uses the car
Bajaj Allianz Zero Depreciation Cover Vs Comprehensive Car Insurance
The key differences between a zero depreciation cover and a comprehensive car insurance policy from Bajaj Allianz are as shown in the table below:
|Parameter||Comprehensive car insurance policy||Zero depreciation cover|
|Maximum number of claims in a year||No restrictions||2|
|Available for cars||All cars||Cars aged 5 years or below|
|Plastic parts including door panels and bumper||50% depreciation is considered||100%|
|Cost of painting materials||50% depreciation is considered. If the bill is a consolidated one, 25% of total cost is considered as depreciation||100%|
|Glass parts, including side window glass, windshield, etc.||100%||100%|
|Wooden and metal parts||
|Battery, fibreglass parts, tyres, and tubes (The claim is accepted by the insurer only if the car is also damaged in the accident. Otherwise, it is not honoured for tyres and battery)||50% depreciation is considered.||100%|
|Airbags||50% depreciation is considered.||100%|
|Hydrostatic lock||Not covered, but can be included in the coverage with an add-on cover||Not covered, but can be included in the coverage with an add-on cover|
|Theft||Equal to Insured Declared Value (IDV)||Equal to Insured Declared Value (IDV)|
|Compulsory excess in the event of a claim||Not covered. The insured will have to pay the standard rates as per the policy||Not covered. The insured will have to pay the standard rates as per the policy|
|Cost of oil change and consumables, even in the case of an accident||Not covered. It is deducted from the claim amount as per the cost||Not covered. It is deducted from the claim amount as per the cost|
In addition to the above factors, it should be noted that the premium for a zero depreciation cover is around 20% more than the premium for the comprehensive car insurance policy.
Things to Keep in Mind Before Buying Zero Depreciation Cover
The zero depreciation cover, also referred to as nil depreciation cover or bumper to bumper insurance, clearly has a wide range of advantages over the standard comprehensive plan. But the fact that it is significantly more expensive than a comprehensive cover can be a deterrent for people looking to buy affordable insurance for their vehicles.
Paying for a zero depreciation cover implies that you are paying a higher amount initially (on a consistent basis) so as to avoid contributing in a future claim settlement scenario. Nevertheless, the peace of mind that the zero depreciation insurance promises is priceless.
When Should You Opt for the Zero Depreciation Cover?
- If you are the owner of a brand new car, then it makes sense to protect it with a zero depreciation cover.
- If you are a new driver, then your chances of getting involved in an accident are high. So buying bumper to bumper insurance is recommended.
- People with luxury cars should be very careful on the roads, as replacement of parts of such vehicles can be an expensive affair. Zero depreciation cover is a very useful insurance solution for luxury cars.
- If you live in an area with high incidence of accidents, then you should ideally protect your vehicle with zero depreciation cover.
GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017