As per the Motor Vehicles Act, 1988, it is mandatory for every car owner in India to avail a suitable motor insurance for his/her vehicle. As per the law, one should insure the vehicle with a third-party liability cover at least. The rising number of vehicles on Indian roads has led to an increase in traffic as well. This, in turn, can lead to many vehicular accidents. Hence, it is vital that a person owning a vehicle avails a car insurance policy to financially safeguard oneself from unforeseen liabilities incurred as a result of a mishap.
Depreciation in car insurance is loss in the value of a vehicle as it ages. Due to the depreciation factor, a policyholder cannot receive the claim settlement in full. A part of the insured amount, pertaining to the deductibles and depreciation will be deducted during the claim settlement. Depreciation affects the vehicle and the vehicle parts. To get the claim settlement in full at the time of mishap, you can avail any of the below add-on covers/riders that the insurers have to offer today:
A zero depreciation cover, also known as nil depreciation cover or bumper to bumper cover, when availed, allows the policyholder to receive the claim settlement in full without deducting the value of depreciation on the car parts that have to be repaired or replaced after a mishap. This cover is especially useful for luxury car owners as this cover reduces the financial stress of the policyholder post a mishap by covering the expenses for replacing or repairing the car pats. You cannot avail this cover as a standalone policy, you will have to avail this with a base policy such as a comprehensive car insurance policy.
A comprehensive car insurance policy offers extensive coverage to the policyholder and covers the following:
The difference between a comprehensive car insurance policy and a third-party liability cover is that, in the event of a mishap where the liabilities are more, having a comprehensive cover will be more beneficial than a zero depreciation cover.
The value of any vehicle depreciates with time, as the vehicle ages the value of its parts reduces. In most cases, the insurers offer no salvage on car parts made of glass, rubber or plastic due to their quality and value depreciating with the age of the vehicle. The below given table represents the depreciation in the value of the car with respect to its age. Depreciation is taken into consideration by all the insurers when calculating the vehicle's IDV and determining the claim amount.
|Age of the vehicle||Rate of depreciation|
|Less than 6 months||5%|
|Over 6 months but less than a year||15%|
|Over 1 months but less than 2 years||20%|
|Over 2 months but less than 3 years||30%|
|Over 3 months but less than 4 years||40%|
|Over 4 months but less than 5 years||50%|
You should consider availing a zero depreciation cover based on the following factors:
Also, ensure you do your own research and avail a car insurance policy that meets your insurance needs. Make sure to top-up the chosen base policy with appropriate add-on covers that will benefit you at the time of a mishap.
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