What is zero depreciation car insurance cover?
Zero depreciation is an additional benefit (add-on) that every car owner can enjoy at the cost of paying an extra/higher premium. Zero depreciation is usually not included in the standard/comprehensive no-frills insurance policy.
At the time of insurance claims, every insurance company always calculates and applies the depreciation rate to decide 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 shelled out by the insured/car owner.
With zero depreciation add-on, when you file an insurance claim due to damage/loss to your car, the insurer covers the entire cost without accounting for/counting in the vehicle’s depreciation. Zero deprecation is an attractive prospect for customers who want a smooth claim settlement in the future, along with 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 burn a hole in the owner’s pocket.
What is depreciation rate in car insurance?
Though the depreciation rates taken into account vary from one insurance company to another, there are some standard policies followed by every company. Some parts of the car age faster than the others. Hence the depreciation value is higher for them. Depending on these factors, the insurer applies different depreciation rates for different parts of the car.
Rubber/plastic parts, tyres/tubes, battery etc. are susceptible to maximum amount of wear and tear. Hence, the depreciation rates applied on them are usually higher compared to other parts like fibre glass, etc. The depreciation of metallic parts are based on the age of the vehicle.
The Insurance Regulatory and Development Authority (IRDA) has set some guidelines on the depreciation of car parts:
|Plastic, nylon, and rubber parts||50% depreciation is deducted|
|Car batteries||50% depreciation is deducted|
|Fibreglass components||30% depreciation is deducted|
|Wooden and metallic components||The depreciation is calculated based on the age of the vehicle. This could be 5% at the end of the first year, 10% at the end of the second year, and so on.|
Some important aspects of zero depreciation
- Applicable only on new cars
Usually, only new cars can avail the zero depreciation add-on. 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.
- Compulsory excess
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 who has taken a zero depreciation has to pay a mandatory policy excess. This is known as compulsory excess.
- Restriction on number of claims
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.
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.
Differences between zero depreciation and comprehensive car insurance policy
|Comprehensive Car Insurance Policy||Zero Depreciation Car Insurance|
|Is the all-encompassing car insurance policy inclusive of add-on covers and protection against financial liabilities arising from a number of common, everyday scenarios.||This insurance policy protects the owner/driver of the vehicle against the depreciation factor due to normal wear and tear that impacts the settlement value in case of claims.|
|Usually includes add-on covers to boost the overall effectiveness of the policy (Eg- Personal accident cover, Hospital cash, Key replacement cover, etc.)||Is usually offered as an optional add-on cover alongside the comprehensive car insurance policy. However, customers can also choose to opt for this as a standalone policy.|
|Since many scenarios are covered, the applicable premium amount is expected to be higher, however it is lower as compared to Zero Depreciation policy.||Since this policy provides protection against ONLY the depreciation factor, the applicable premium amount is expected to be low. However, it is higher when compared to the normal policy.|
|Ideal for those who are looking for complete protection for their cherished vehicle and are conscious about the budget involved.||Ideal for those who deem themselves confident drivers and could do with a little less insurance. Also, people can opt for this policy to stop losing money due to the depreciation factor when raising a claim.|
Benefits of zero depreciation car insurance
The following points illustrate the benefits of zero depreciation car insurance, from the context of an average, everyday motorist-
- When raising a claim, the insured is assured of 100% settlement of the cost of the vehicle’s repairs, without taking into consideration the depreciation factor that arises from normal wear and tear.
- The normal, comprehensive car insurance policy doesn’t account for damages incurred by the glass, plastic, nylon, fibre, etc. parts of the vehicle. However, zero depreciation policy pays for all of these.
- The inherent cost of subscribing to the zero depreciation car insurance policy might be a tad more than the conventional policy, however, this gap is usually made up for when the insured raises a claim after a particularly nasty accident.
- Assures 100% mental peace and satisfaction to the insured, in the knowledge that he/she is unlikely to lose any money when tending to their damaged vehicle. Technically, they are repairing their accident battered vehicle for free.
Is zero depreciation insurance promoting careless driving?
Considering the watertight protection offered by the Zero Depreciation Insurance policy in the case of a claim, many subscribers may feel a sense of invincibility in the knowledge that with this cover, all their losses will be recovered without losing anything to the depreciation factor. This begs the question- Is zero depreciation insurance policy promoting careless driving?
|Customers’ attitude towards expensive auto repairs is changing, as everything can be set right at little to no personal expense.||Customers are still concerned about the No Claim Bonus (NCB). They lose this lucrative benefit when they raise a claim.|
|Customers use these trips to the garage to refill up on, and set right nags that may not require servicing. Every inconsequential problem with the vehicle is likely to send it packing to the garage.||Most people still consider Zero Depreciation insurance to be an expensive indulgence. If they have it, they are more likely to utilise it in extreme cases of damage incurred by their vehicle.|
|Zero Depreciation Insurance is usually not available for the entire lifetime of the vehicle. Thus, individuals might be tempted to avail it before the time runs out on them.||For the unsure driver, Zero Depreciation Insurance acts like a confidence booster. It is bound to take away the fear of incurring massive repair bills if damage were to happen, and help the subscriber prepare better for a rainy day.|
Thus, this question has no clear cut answer. How the policy will be used and if it breeds careless driving habits will ultimately depend on the individual driver. However, recent instances point to car insurance companies paying particular attention to this disruption inducing policy and have denied its availability to specific vehicle makes that have been known to be particularly prone to accidents and damage.
Who should purchase the zero depreciation cover?
If you are the owner of a new car, buying a zero depreciation rider to enhance its insurance coverage is a good idea. The rider also suits new drivers who are more prone to damaging their vehicles. However, it should be noted that even the most experienced of drivers can be involved in an accident that was the fault of the third-party. In this situation also, a zero depreciation cover would come to the rescue of the driver.
So, if you own a new car and do not mind paying the extra premium for this add-on cover, you should go for it.
What is the additional premium payable for a zero depreciation cover?
Since a zero depreciation cover offers you the entire claim amount without considering depreciation, it will certainly be priced quite high. The general understanding is that a car insurance policy with zero depreciation add-on cover will cost around 15%-20% more than the base policy alone.
However, the actual cost varies on the basis of the policyholder’s driving history and the regulations set by the insurance company.
What are your savings in a year when you have a zero depreciation cover?
Let us consider an example to understand how the zero depreciation cover works in the event of a claim. Say, the cost of your car is Rs.8 lakh. Suppose the cost of damage to its parts and depreciation is as shown below:
|Part of the car||Cost of damage (Rs.)||Percentage depreciation||Cost of depreciation (Rs.)|
|Metal part||10,000||5% or 0.05||500|
|Fibreglass part||2,000||30% or 0.3||600|
|Plastic part||10,000||50% or 0.5||5,000|
So, if you have a comprehensive car insurance policy without the nil depreciation cover, you will have to pay Rs.6,100 for the repairs.
Now consider a scenario in which you have the zero depreciation cover attached to your base auto insurance policy. The total expenses that you will be bearing in a year are as detailed in the table below:
|Cost of auto insurance and claim amount||Amount without zero depreciation cover (Rs.)||Amount with zero depreciation cover (Rs.)|
|Basic premium (I)||14,000||14,000|
|Cost of zero depreciation add-on (II)||0||3,000|
|Total cost of the policy (A) = (I) + (II)||14,000||17,000|
|Deductible for each claim raised (III)||3,000||3,000|
|Cost of repair of the car, based on the table above (IV)||29,000||29,000|
|Cost of depreciation borne by the policyholder, based on the table above (V)||6,100||0|
|Total expenses borne by the policyholder (B) = (A) + (III) + (V)||23,100||20,000|
|Policyholder’s savings (C) = (IV) - (B)||5,900||9,000|
The above table indicates that the policyholder can get significant savings even if he/she raises only one claim in a year.
Exclusions in zero depreciation plans
Zero depreciation plans, also referred to as bumper to bumper insurance, have some exclusions as described below:
- The plan is not offered to cars that are more than 5 years old.
- The zero depreciation cover is not provided to vehicles that have clocked more than a specified number of kilometres.
- Nil depreciation cover usually has limitations on the maximum number of claims that can be raised in a year. This is implemented by insurers to prevent policyholders from raising claims for every small dent or damage. The limits vary between insurers, so you should check the policy documentation to understand the specifics for your plan.
- A zero depreciation cover does not protect the car from damage to its engine through oil leakage or water ingression.
- Standard wear and tear to cars and car parts such as clutch plates, tyres, bearings, etc. are not covered under nil depreciation insurance.
- Other exclusions from bumper to bumper insurance include mechanical breakdowns (that do not result in an accident) and consequential damages.
- Cost of oil, such as gear oil, clutch oil, brake oil, engine oil, coolant, etc. are not covered.
- Compulsory deductibles are not covered under a zero depreciation plan. At the time of a claim, the amount corresponding to compulsory deductibles will have to be borne by the policyholder.
- A private car being used for commercial needs is not included in the coverage of the plan.
- The driver not carrying a valid driving license is also not covered.
- The driver being under the influence of drugs or alcohol is excluded from coverage.
- If the claim is not made within the stipulated timeframe, it will not stand valid.
- The driver using the car for malicious purposes is also not covered.
When is a zero depreciation claim null and void?
When a claim is raised against a zero depreciation add-on cover, it will not be honoured by the insurance company if any of the exclusion criteria are met. It is important that the policyholder furnishes accurate information with justifying documents when raising the claim to prevent it from being invalidated.
Shortcomings of nil depreciation cover
- One of the main disadvantages of buying bumper to bumper insurance is the cost factor. If you are looking to insure your car at a minimal cost, then this is not an option.
- Zero depreciation cover also has a considerable number of exclusions. The basic exclusions involved in comprehensive car insurance are valid here as well.
- Zero depreciation cover is not offered to vehicles that are more than 5 years old.
- There are limits on the maximum number of claims that can be raised under a zero depreciation cover in a year.
Does it make sense to go for this cover?
If you are not very particular about containing your car insurance expenses to a certain limit, then you should go for a zero depreciation cover. This will enhance the coverage of your policy to a great extent and offer maximum protection for your car.
- The zero depreciation cover is very useful for owners of new cars.
- Also, if you are not an experienced driver, it makes sense to buy this coverage.
- Owners of high-end cars with expensive parts can also benefit from this insurance cover.
- If you live or park your car in an area where the incidence of car thefts or other such crimes are high, you should protect your vehicle with bumper to bumper insurance.
- If you are conscious about small dents or bumps that may surface on the body of your car, you should consider taking zero depreciation insurance.
Zero Depreciation Car Insurance FAQs:
- What factors affect the premium of a nil depreciation cover?
The premium you pay towards a zero depreciation add-on cover is based on the following factors:
- Age of the vehicle
- Model of the car
- The location of usage and parking of the car
- Which insurers in India offer zero depreciation insurance?
Most of the Indian insurance companies offer zero depreciation cover as an add-on policy. This includes:
- Bajaj Allianz
- Bharti AXA
- Tata AIG (refers to the add-on as depreciation reimbursement cover)
- Royal Sundaram (refers to the add-on as depreciation waiver cover)
- Will the zero depreciation add-on policy offer coverage for theft of the car’s tyres?
This depends upon the policy wordings. Usually insurers offer this cover only for the repair or replacement of tyres/tubes due to accidental damage.
- I have a restricted cover policy with my insurance company. Can I avail the nil depreciation add-on insurance for my car?
No, add-on covers can be availed only with a comprehensive package policy.
- I have heard that insurers offer add-ons as bundles. Can I choose only the zero depreciation add-on?
Insurance companies offer add-on covers in bundles so that a customer’s policy coverage is optimised. However you can request for only the zero depreciation add-on cover, if that is what you specifically require.
ARTICLES:Car Insurance Guide Page
Top car care myths busted for you
We have grown up listening to several maxims pertaining to cars that are hard to forget. These may have even trickled down to change the way in which we drive or care for our cars.
No, premium fuel may not help your vehicle’s engine generate higher power. Cell phones also do not cause fires at petrol pumps.
We have created an interesting page to debunk some of these age-old myths, and every car owner ought to read it.
How relocation affects your car insurance
Shifting to another city is nothing short of a mammoth task. In the midst of arranging your accommodation, getting your family settled at the new place, and ensuring an overall smooth transition, it is easy to miss out on informing your car insurer.
But you should be aware of the impact of relocation on your car insurance policy. This page is a must-read, as it elaborates on the tasks you need to do before you shift.
The car insurance riders you should ideally purchase
When looking to protect your prized set of wheels you would settle for nothing less than the best. So, you purchase a comprehensive car insurance policy that offers extensive coverage. But at the time of filing a claim, you realise that you are expected to pay a good chunk of the expenses, proving that your package policy was not all that comprehensive after all!
To avoid getting into such a state, it is ideal to read through your policy documentation and understand the nuances of the coverage. It is also a good idea to opt for a few essential add-on covers that can amplify the protection offered by your comprehensive base policy.
This page educates you on the most important add-on covers offered by insurers and how you can protect your car using these.
Important Things To Know When Applying For Car Insurance Online
E-commerce has arrived in India in a big way. The digitally native working professional prefers online shopping to waiting in queues at physical stores. When you buy everything from clothes to groceries, train tickets and electronic items online, why shouldn’t you buy insurance solutions the same way?
There are several myths associated with buying insurance online. But you should know how to sieve out the truth from fiction. Insurance companies today are promoting online purchase of insurance like never before. Apart from bringing down the cost of the policies, online purchase is also highly convenient and suitable to the fast-paced life of the modern customer.
This article throws light on the notable advantages of online car insurance purchase.
What documents should you carry when going on a long drive?
Planning for a vacation in the near future? Or are you just looking forward to a long drive to destress yourself? Whatever your plans are, it is imperative that you carry all your vehicle documents when you go on a long drive. Your rejuvenating vacation could easily transform into a distressing episode if you are caught by the police and are required to produce the car documents that you left at home.
This page lists out all the vehicle documents that you should carry when travelling long distances. Use this as an essential travel checklist and enjoy your vacation the way you planned it!
News About Zero Depreciation Car Insurance
MRF Ventures into Luxury Segment with the Launch of Perfinza Premium Tyres
India’s largest tyre manufacturer MRF entered into the luxury segment with the launch of its Perfinza range of luxury and premium tyres. According to MRF, Perfinza is the first tyre made by an Indian manufacturer to get technical approval from a German car company. The company has also roped in cricket sensation AB de Villiers as its global brand ambassador.
These tyres have been developed by the company’s in-house R&D team. MRF also mentioned that these tyres have been extensively tested in various countries like India, Germany, and Spain. At present, the Perfinza range will primarily focus on the 15- to 18 inch segment.
This move will help MRF tap into the luxury segment, which comprises only a tiny segment of the Indian car market. The Perfinza range will be launched first in the Indian domestic market and then into the global market.
21st September 2017
Cess Hike on Luxury Cars Likely to Get Postponed
The immediate cess hike on luxury cars is most likely to get postponed. The ongoing festive season is attributed to be the main reason why the cess hike is likely to be put on hold. A hike in cess will dampen the demand for luxury cars during this period. The final decision on the issue will be taken after the discussion by the GST council, which meets on September 9 in Hyderabad.
The GST council has earlier proposed that the surcharge on luxury cars must be increased from the current 15% to 25%. This has prompted many buyers to book luxury vehicles immediately in order to beat the price hike.
The festival season is an important period for car manufacturers as demand is likely to shoot up during this period. The government’s move to put the cess hike on hold will benefit car manufacturers and buyers who are thinking of buying high-end cars.
20th September 2017
Audi Q7 Petrol Variant Now Available from Rs.67.76 Lakh in India
Audi has launched the petrol variant of its flagship model Q7 for the Indian market. The Audi Q7 petrol will be sold alongside the diesel variant, which is already available in the market. The petrol variant of Q7 is priced at Rs.67.76 lakh (ex-showroom).
Audi Q7 petrol will feature a 2.0-litre, four cylinder engine that operates through turbo fuel stratified injection (TFSI) technology. The engine delivers an output power of 252 bhp and torque of 370 Nm. This all-wheel drive vehicle comes with an 8-speed automatic transmission.
The petrol variant of Audi Q7 can accelerate from 0 to 100 kmph in just 6.9 seconds, and it can achieve top speed of 233 kmph. Audi has declared that the petrol variant will have fuel efficiency of 11.68 kmpl, and it has been approved by the Automotive Research Association of India (ARAI).
15th September 2017
Honda Jazz ‘Privilege Edition’ to light up the festive season
Honda Cars India Ltd. (HCIL) has announced the ‘Privilege Edition’ of its premium hatchback, Honda Jazz. The model comes with enhanced interiors and exteriors, an advanced infotainment system, and attractive safety features.
The car is equipped with DIGIPAD, a revolutionary 17.7 cm infotainment module with the following features:
- In-built satellite-linked 3D navigation facility
- My Storage with 1.5 GB internal media memory
- Mirror Link support for smartphones
- Internet access
- Voice commands for navigation, media, and calling
- Bluetooth for hands-free audio and telephone facility
- Micro SD Card slots for media and maps
The car also has safety features like rear parking sensors and the Honda Connect app. The vehicle is priced Rs.5,000 more than V Grade models. The ex-showroom prices for the car in New Delhi are:
- V MT Privilege Edition - Petrol : Rs.7,36,358
- V CVT Privilege Edition - Petrol : Rs.8,42,089
- V MT Privilege Edition - Diesel : Rs.8,82,302
31st August 2017
Launch of Hyundai Verna 2017
Hyundai India announced the launch of the new Hyundai Verna 2017 last week. The mid-size sedan is priced between Rs.7.99 lakh and Rs.12.61 lakh, ex-showroom Delhi. The car is offered in 12 variants based on engine and transmission options.
There are 7 colours in which you can choose to buy the Hyundai Verna 2017. These are Sleek Silver, Polar White, Siena Brown, Star Dust, Fiery Red, Flame Orange, and Thunder Black. The car will compete with Skoda Rapid, Volkswagen Vento, Honda City, and Maruti Suzuki Ciaz in the market.
The vehicle is available in diesel and petrol variants. The engine is mated to a 6-speed manual and 6-speed automatic transmission. Other prominent features of the car include six airbags, ventilated front seats, Voice Commands, touch-screen display with MirrorLink, Android Auto & Apple CarPlay support, etc.
The petrol MT version of the car delivers a mileage of 17.7 kmpl, while the petrol AT version has a fuel economy of 15.92 kmpl. The diesel MT version provides mileage of 24.75 kmpl and the diesel AT offers 21.02 kmpl fuel economy.
28th August 2017
GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017