One of the major car insurance facts each car rider should know about is the zero depreciation car insurance cover which ensures you higher claims in case of damage
After a car accident, it feels embarrassing to know that you can only claim for the major damages that occurred and rest are excluded from the claim because of depreciation applied. Zero depreciation car insurance is the best way to resist this situation. It will provide higher claims against the damages that occurred as compared to that in normal car insurance.
Difference between zero depreciation car insurance and normal car insurance
Car insurance covers expenses one might experience due to car damage fully or partially or stolen. But there is a twist. General car insurance is not entitled to a 100% claim on the expenses occurred on the damage. Depreciation or other wear and tear comes in the view.
As per the rules, only the residual value, i.e, the remaining value of the part after deduction of depreciated value, will be allowed to claim by the insurance company. For Eg., if the replacement cost rupees 50,000 of any part but 50% depreciation is applicable, then only rupees 25000 will be reclaimed by the insurance company.
Whereas if we talk about zero depreciation car insurance, it ensures a complete claim without considering the depreciation amount. So relax, if your vehicle faces any damage, the insurance company will bear the entire cost of repair or replacement.
Rates of Depreciation
Depreciation means a decline in the original value of the product. Different materials and parts have different rates of depreciation pre-decided. The rates of depreciation are as described below:
- 50% depreciation is applied to the material cost of the paint, for a paint job.
- For all rubber/ nylon/plastic parts, tires and tubes, batteries, and airbags – a depreciation rate of 50% is applied
- 30% depreciation is applicable for fiberglass components
- for glass made parts- Nil
- depreciation is applied to the wooden parts and all other parts according to the age of the vehicle as per schedule:
|Age of Vehicle||% Depreciation|
|Not exceeding 6 months||NIL|
|Exceeding 6 months but not exceeding 1 year||5%|
|Exceeding 1 year but not exceeding 2 years||10%|
|Exceeding 2 years but not exceeding 3 years||15%|
|Exceeding 3 years but not exceeding 4 years||25%|
|Exceeding 4 years but not exceeding 5 years||35%|
|Exceeding 5 years but not exceeding 10 years||40%|
|Exceeding 10 years||50%|
So for eg., 50% depreciation only will be claimed from the total cost of tires are to be replaced. So as if it cost you rupees 8000, you will get a claim of rupees 4000 only.
Why it’s a good option to buy a zero-dep insurance
If you have the option to get a full claim instead of getting a depreciated claim. Don’t you prefer to select an option with a higher claim?
High rates of depreciation reduce the price of insurance claims. Especially for plastic parts that are affected the most in a car accident.
Additional Premium payable for Zero Depreciation Insurance
Premium paid for insurance relays on the Insured Declared Value (IDV) of the car. In case it gets stolen or damaged beyond repair, within the policy period. It is essentially the maximum amount you can claim.
Generally, depreciation is applied according to the age of the car, model, or location.
Whereas the additional premium payable is 20% of the standard car insurance policy.
In what case paying additional premium makes sense if,
- Owned a new car – depreciation is applied the second your car rolls out of the showroom. So technically, if you damage your car the next day, you will get a claim accordingly.
- Owned a high-end luxury car – parts of these cars cost an arm and a leg. So, why not opt for higher claims instead of depreciated parts only.
- You are a beginner or an accident-prone – you must buy it if you have a history of damaging cars.
One must consider the following points before planning for zero-dep insurance:
- It is generally available for vehicles not older than 5 years.
- Only 2 claims are allowed in a single insurance term period.
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