Everything about Zero Depreciation Car Insurance Explained
A family went out for a picnic in two cars, each of which was loaded with the family members only. Both were Toyota Fortuner of 2018 and 2019 model. The latest model of Fortuner had add-ons of Consumable cover and Zero Depreciation purchased under the Comprehensive Cover. On the other hand, Fortuner 2018 was a 1-year-old car covered with Comprehensive Insurance Policy only. On the way, a biker came speeding to merge in traffic and just a few minutes both the cars banged. The owner of the car filed claims to the insurer but there was a difference between the amount of settlement. Other than the variation in the extent of damages, the settled claim amount was different due to the Zero Depreciation Cover. Let us understand Zero Depreciation Car Insurance in detail.
What is Zero Depreciation Car Insurance?
When as an insured you get the full and final admissible settlement of the claim without any depreciation applied, it can be referred to a Zero Depreciation Car Insurance . If your car gets damaged after a collision, then the insurer will pay you the whole cost of repairs or replacement of the parts.
A Zero Depreciation Car Insurance offers absolute 100% coverage for all rubber, metal, and fibre parts without any deductions.
What's not covered in Zero Dep: In a Zero Depreciation cover, the damage to the engine due to oil leakage or water clogging is not covered.
Who should buy a Zero Depreciation Cover?
It is preferable to buy a Zero Depreciation cover if you :
1. Own a new car or one whose age is up to 5 years.
2. Own a luxury car
3. Live in an accident-prone area.
4. If the cost of repairs for the spare parts is high.
Car Insurance with or without Zero Depreciation Cover: Which is better?
You just read above, that two cars owned by the same family had to face difference in the claim settlement amount. So let us understand the intricate details and difference between the two types:
| Particulars | Car Insurance with Zero Depreciation | Car Insurance without Zero Depreciation |
| Premium | The premium under this type of insurance is higher. | The premium is comparatively lower. |
| Covers Cars up to | Generally, it covers cars up to 5 years of age. | Covers cars up to a maximum of 15 years. |
| Repair of Spare Parts | The cost of repairs of the spare parts is taken care of by the insurance company. | You will have to take care of the cost of repairs of the spare parts. |
| Claim | The amount of claim settlement does not consider the depreciation amount. | The amount for claim settlement will consider depreciation on spare parts of glass, fibre and plastics. |
Advantages of a Car Insurance Policy with the Zero Depreciation rider
You buy a Car Insurance policy to seek financial benefits at the time of claim. Not every year of the policy, you get a claim but an insurance policy will always give you peace of mind. Buying Car Insurance Policy with Zero Depreciation rider offers advantages like:
a) It is helpful when both amateur and experienced drivers try to drive a car and end up with a collision. The cost of repairs will be settled by insurers.
b) The scope of the car insurance policy widens and you are relieved from the unexpected expenses.
c) The cost of settlement for repairs will be done without considering any deductions. These deductions will vary depending on the market value of the car.
What would happen if your car insurance does not have a Zero Depreciation add-on?
Suppose you bought a BMW in September 2019 for Rs.29.7 lakhs. You are a perfect driver but one day to save a biker on the road, you lost balance and got your car banged against a tree. The headlights of the car broke. These were made of polycarbonate lens that is a plastic-type only. The total claim assessed by the surveyor for one dent in front along with the breakage of the headlight was computed Rs.70,000/-. You had a Car Insurance policy now let us see how will the claim be treated:
a) With Zero Dep Cover.
| The amount of the cost of headlight repair | Rs.55,000/- |
| The cost to remove the dent | Rs.15,000/- |
| Total Cost payable of Repair | Rs.70,000/- |
| Deductible per claim | Rs. 2,000/- |
| Net Payable under the Car Policy | Rs.68,000/- |
The complete cost of repair of Rs.68,000/- will be covered by the insurance company.
b) Without Zero Dep Cover
But imagine if you do not have a Zero Dep Plan, then depreciation of 50% would have been applied.
| The amount of the cost of headlight repair | Rs.55,000/- |
| Depreciation @50% | Rs.27,500/- |
| After Depreciation | Rs.27,500/- |
| The cost to remove the dent | Rs.15,000/- |
| Total Cost payable of Repair | Rs.42,500/- |
| Deductible per claim | Rs.2,000/- |
| Net Payable under the Car Policy | Rs.40,500/- |
Hence, the insurance company will pay only Rs.40,500/- and the remaining amount you will have to pay from your pocket. The difference amount of Rs.27,500/- ( Rs.68,000-Rs.Rs.40,500) is huge which you will have to pay. Instead of paying this claim amount, you could have opted for a Zero Depreciation Cover paying an extra premium.
This explains that buying a Car Insurance Policy is beneficial but adding it with Zero Depreciation cover will be helpful for you in case of claim after an accident. The premium you pay may be higher for a Zero Depreciation Cover but at the time of claim, you may save more.
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