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.
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.
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 particular vehicle makes that have been known to be particularly prone to accidents and damage.
GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017