Car insurance companies offer you few add-on covers when you purchase car insurance. One of the covers is ‘Zero-Depreciation’. Many of us are not aware of the benefits and the meaning of this cover.Insurance buyers usually say ‘no’ to add-on covers as we think it is simply a tactic for the salesperson to increase our bill amount. But it is not true. The add-on covers are offered for a reason and you will be surprised to know it. Read on:
A ‘‘Zero-Depreciation’’ is an add-on benefit cover that gives you a full coverage for your vehicle as a whole or part of your vehicle, without deductions of depreciation. This is a huge advantage, because while calculating for compensation or repairs in accidents, all insurers take depreciation value into consideration. It is the difference between the market price of the replaced part and depreciated part. That is the reason why standard plan gives you a claim amount after deduction the depreciation value. If you are buying a new car, opt for this add-on benefit with extra premium because it is a worthwhile investment option.
If you are buying a second-hand or used car, then you cannot avail this benefit. This is applicable only to new car under a certain age limit of the vehicle. Every insurer will specify an age limit to avail this rider cover, if it is older than that you cannot purchase this policy.
Normal wear and tear, mechanical breakdown, etc. are not covered under the option. A compulsory excess has to be borne by the owner of the car in case he wants to get these parts repaired.
Every insurer specifies on how much claims you can make in a year. Though the coverage is not 100% as mentioned above, the number of claims will vary from insurer to insurer.
|Zero Depreciation Car Cover||Comprehensive Car Insurance|
|A ‘‘Zero-Depreciation’’ is an add-on benefit cover that gives you a full coverage for your vehicle against the normal wear and tear that will affect the value of the car at the time of settlement.||This is a normal car insurance policy that gives you and the car protection against a number of common problems in day to day commuting. Please read the document carefully to understand further coverage.|
|Apart from being a rider on the comprehensive policy, you can chose this cover as a standalone policy.||You will have the option to extend your cover alongside the standard policy with multiple riders.|
|You will have to pay extra premium to avail this benefit which is slightly higher when compared to a standard policy. It covers only the depreciation aspect of the car.||This policy covers many situations which the car might face on certain days. The premium amount payable is lower than nil cover.|
|You can opt for this cover if you are not conscious about paying a little extra to protect your car from depreciating.||It is not compulsory to opt for nil depreciation if you are comfortable with this cover and you are okay with depreciation value of the car.|
Since a car is a machine, few parts are more vulnerable to damage than the others like fiber, plastic, rubber, etc. These parts age faster than the actual machine components of the car. Hence the depreciation rate for these are also different for each part. The rate of depreciation applied by each insurer is different. But the IRDA has set some standard rat of percentage on these parts:
|Wooden and metallic parts||5% is the standard rate at the end of first year. From second year there will be an increase of 5% on the base rate every year. This depends on the age of the vehicle.|
|Plastic and rubber||50%|
|Fiber and glass||30%|
When you purchase the policy, please read the terms and conditions clause very carefully. The claim period and premium amount and few of the factors which are not standard according to the government may vary from company to company. If you claim for the damages under comprehensive policy, the settlement amount will be reimbursed to you after deducting the depreciation value of the vehicle. If you claim under zero-depreciation cover, the claim amount will be paid only after deducting few things which are not covered under the policy. For each type of claim there will be certain conditions on how to avail the claim. And most importantly know what is not covered in this add-on because it is not standard with every company. Generally, the following this are the instances when you can and cannot avail:
Since the reimbursement value is 100% at the time of claim settlement, it is only natural that the premium paid will also be a little expensive. It usually ranges between 15%-20% on your base policy rate. It is also depends on the history of the driver and the insurance company.
Listed in the table below is the premium of a car insurance policy with the zero depreciation add-on cover assuming that the cost of the vehicle is Rs.8 lakh:
|Part of the car||Cost of the damage||Depreciation cost|
|Price of premium and claim||Without the zero depreciation cover||With zero depreciation|
|Zero Depreciation Add-on Cover(Y)||Rs.0||Rs.2,500|
|Deductible applied per claim||Rs.1,000||Rs.1,000|
|Total Cost of the Policy (Z=X+Y)||Rs.10,000||Rs.12,500|
|Cost of Repair||Rs.20,000||Rs.20,000|
|Total amount of money saved||0||Rs.5,000|
*The values displayed in the table above are subject to change from one insurer to another.
If you are planning to buy a new car, then opting for this rider add-on benefit is the ideal option for you. Even minor scratches or unfortunate damages caused to your new vehicle because of the fault of the third-party, this add-on benefit can be your rescuer. It might cost you a little extra, but it goes to a long way in saving you from all those extra money spent to repair your car.
For damages caused due to public protests like fire or destruction of the bike, few insurers offer to cover a part of the expense in some cases. If you have further doubts, enquire with your insurance provider so there will be no confusion in the future.
Some of the major insurance providers like Bharti AXA General, ICICI Lombard, Tata IG, Reliance and HDFC Ergo have been offering the ‘Zero-Depreciation’ cover since past two years. And majority of them allow two claims per policy period along with no-claim bonus benefit. IDRA has allowed this benefit in the market since past two years, and it’s time we make use of it. With the road conditions here, the potholes, traffic etc. make it miserable to enjoy your new car and it’s hard to save from some unforeseen damages. So the wiser thing to do is to get this add-on cover so we can ride tension free and also its pocket friendly. Contact your insurance provider today or shop online for best deals.
Bharti AXA General, ICICI Lombard, Tata AIG, Reliance, HDFC Ergo and Royal Sundaram have been offering the ‘Zero-Depreciation’ cover since past two years.
This depends on the insurance provider. Usually theft and robbery of any part is not covered under this cover. It can only be availed along with comprehensive policy as an add-on benefit.
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