Zero depreciation car insurance - Everything you need to know

If you have a car and you wish to drive the car on Indian roads, you need to have a valid insurance cover on the car. The Motor Vehicles Act, 1988 mandates that every vehicle on Indian roads should have a valid insurance cover on it.

Since car insurance is mandatory, you are required to invest in a policy for fulfilling the mandate. But don’t you want the best coverage for your beloved car?

Buying a car and maintaining it requires quite a considerable amount of money and in case of damages you face heavy expenses to get the repairs done. That is why it is always advised that your car insurance policy should have a comprehensive cover. When you invest in a comprehensive plan, the policy pays for the repair costs which are incurred if your car faces any damage and you are spared from the financial burden. But did you know that in case of repairs, the insurance company pays only the depreciated value of the car’s parts?

Depreciation is a reduction in the value of assets due to their use. In a car insurance policy, as the car is used, the parts face regular wear and tear. This wear and tear is called the depreciation. At the time of claim, the insurance company deducts the cost of depreciation from the value of the car’s parts and then pays the claim. This reduces the claim greatly and you need a comprehensive policy which prevents this claim reduction

A zero depreciation cover is one such comprehensive cover which proves very useful in case of damages suffered by your car. Let’s understand what the cover is all about –

What is zero depreciation car insurance?

A zero depreciation car insurance policy, also known as a bumper-to-bumper car insurance policy, is, in fact, a comprehensive car insurance policy with the addition of the zero depreciation add-on. Now you must be wondering what zero depreciation add-on is. Here’s what it is –

Zero depreciation add-on

A zero depreciation add-on is an additional optional coverage benefit which is available with almost all car insurance policies. You have the choice to add the cover to the basic comprehensive car insurance policy to widen its scope. The add-on benefits you when your car suffers damage and repairs are required. Since the insurance company deducts depreciation from the claim amount, you receive a reduced claim. If, however, you select the zero depreciation add-on, the effect of depreciation is nullified. The insurance company pays the entire cost of the parts replaced or repaired and the claim amount is, therefore, high.

So, if you add the zero depreciation cover to the comprehensive policy, you get a zero depreciation car insurance policy.

Know about Types of car insurance and their benefits

Why is a zero depreciation cover beneficial?

Depreciation eats into the claim amount leaving you, the policyholder, has to bear most of the repair costs from your own pockets. A zero depreciation cover prevents this, increases the claim pay-out and, therefore, saves your money. A zero depreciation policy is, therefore, better than a normal comprehensive coverage.

Things to remember about zero depreciation car insurance

Here are certain facts which you should remember about the zero depreciation cover before you opt for it –

The zero depreciation add-on is optional in nature. Only when you include the add-on in the comprehensive policy would your policy become a zero depreciation car insurance policy.
Additional premium is payable for selecting the zero depreciation add-on. That is why zero depreciation car insurance premiums are higher than the premiums of normal car insurance plans. However, the additional premium payable for the cover is low and affordable.
Zero depreciation cover is available usually for cars which are up to 5 years old. However, some insurers also offer the cover for older cars
You can make a maximum of two claims throughout the total coverage period under the zero depreciation cover.
The premium for the zero depreciation add-on varies across different insurers. That is why you should compare the premiums of different companies to choose the lowest amount.

Buying zero depreciation cover

If you are buying a new car or if your car is not very old, opt for a zero depreciation car insurance policy for a comprehensive coverage and to reduce your share of the car insurance claim. The cover can be bought either when buying a new car insurance plan or at the time of renewals.

Car insurance claims can amount to very high amounts and so you should be smart when buying your car insurance policy. Choose a zero depreciation car insurance plan and enjoy wider coverage, higher claims and lower out-of-pocket expenses.