Know More About Zero Depreciation Car Insurance

• Zero depreciation car insurance is an add-on that widens the scope of coverage of your insured car.
• A zero depreciation cover helps to mitigate the high cost of repairs and damages and is advisable if you have purchased a new car or own a luxurious car.
• The zero depreciation car insurance premium depends on various factors like the age of your car, IDV (Insured Declared Value), fuel type, etc.

An add-on, commonly known as a rider, is an additional coverage which increases the scope of your motor insurance. It is an optional and paid benefit that can help you get a higher claim settlement amount on your vehicle.Zero depreciation car insurance is one such add-on that offers enhanced protection to your insured car. Curious to know how? Continue reading this blog.

A zero depreciation cover is an add-on for your comprehensive car insurance, under which you are not required to bear the depreciation. In other words, the insurer covers the entire cost of replacing the parts without deducting depreciation-related expenses.For example, the cost of repairs for your car is billed at ₹50,000. If you have not taken a zero depreciation cover, the insurance provider will settle the claim after accounting for the applicable depreciation charges of ₹15,000 (30% of ₹50,000 - we have assumed 30% depreciation). Thus, the claim settlement amount will be ₹35,000.On the other hand, if you have zero depreciation car insurance, the insurer will settle the entire claim amount of ₹50,000, subject to the policy terms and conditions.

An asset undergoes normal wear and tear during the course of time. This reduction in the value of the asset is termed depreciation.The insurance companies charge depreciation at the rates set by IRDAI (Insurance Regulatory and Development Authority of India). The depreciation rates depend on the age of your vehicle and also differ for different parts.You should know that these rates are subject to change, and it is always advisable to check the applicable rates with your insurer.Here are a few examples of how the depreciation rate varies:

• Rubber, nylon, and plastic parts - 50%
• Fiber glass components - 30%
• Wooden and metal parts - As per your car’s age (e.g. 5% in the first year, 10% in the second, going up to 50% in the fifth year)

Now, let’s understand the impact of the zero depreciation add-on on these rates.

Likewise, here is a tabulation of the impact of zero depreciation on your car’s depreciation

Thus, since you do not have to worry about the depreciation-related expenses, you can expect a higher claim settlement amount with the zero depreciation add-on.

The premium for zero depreciation cover varies from case to case and is dependent on various factors. It is normally higher than a basic comprehensive policy. Speak to your insurer for a better understanding of how the premium is calculated and what is the amount applicable to you.Here are some of the key factors that can influence the premium amount:

• IDV (Insured Declared Value): In simple words, IDV is the market value of your car. It is the amount you can claim if your vehicle is damaged beyond repairs. A higher IDV usually means a higher premium cost, and vice versa.
• Engine Displacement: The displacement size of your car's engine also has a bearing on the zero depreciation car insurance premium. The larger the displacement size, the higher the premium. On the other hand, the lower the displacement size, the lesser the premium.
• Registration Place: It is usually said that the risk of accidents is higher in the case of metro cities like Mumbai and Bengaluru, largely due to the higher number of vehicles on the road.

Meanwhile, the risk is said to be on the lower side in the case of tier-2 and tier-3 cities. Thus, the premium cost could be lesser if your car is registered in these cities.

• Age of Vehicle: The older the vehicle, the more is the premium cost. Thus, if the age of your vehicle is on the higher side, the premium for zero depreciation cover will also be more.
• Type of Fuel: There are different fuel systems on which a car runs. It can either be petrol, diesel, or CNG. Besides, there are electric vehicles too. The premium amount will generally vary on the type of fuel your car consumes.

When you opt for a zero depreciation cover, you don't have to bear the depreciation-related expenses. Hence, it provides you a larger coverage to meet the repair costs. However, the age of your car should generally be up to five years for this add-on.If you have purchased a new car or if you own a luxury car, you should consider buying zero depreciation car insurance. A zero depreciation cover also makes sense if you have to travel long distances daily or are living in an area where the accident rate is high.Further, if you are new to driving, a zero depreciation cover may be suitable for you. New drivers are usually said to have a high risk of damage to their cars.

As mentioned earlier, zero depreciation cover is an add-on which can provide your insured car with extra protection. It can help you get a comparatively higher claim settlement amount as the insurer settles the claim without deducting the depreciation-related expenses.Buying an add-on is as simple as buying your motor insurance . Choose the insurance policy that best suits your needs and bundle it with add-ons to increase the scope of your policy and experience additional benefits. Also Read: Different Types of Car Insurance Policies and Their Coverage