A car insurance is purchased with the objective of getting compensation in case the car gets damaged in future due to accidents or natural calamities. One important factor that you need to keep in mind while filing for compensation is the depreciating value of the car. The insurance company, in the event of a claim, will only compensate you after deducting the cost of depreciation attached to different car parts. This would result in lesser compensation by the insurance company and hence higher burden on you. Therefore, it is vital to understand the benefits of zero depreciation car insurance.

Depreciation means the reduction in your tangible asset’s value owing to wear and tear. To understand what is the benefit of zero depreciation car insurance, let us look at the standard depreciation rates. According to the Insurance Regulatory and Development Authority of India (IRDAI), the following depreciation rates are applicable:

• No deduction on vehicle parts made of glass
• 30% deduction on fiberglass components
• 50% deduction on components made up of rubber, nylon, or plastic like airbags, tires, tubes and batteries

Overall Depreciation Rate for Vehicles

Overall Depreciation Rate for Vehicles Metallic Parts

Zero Depreciation Insurance Benefits

Opting for a zero-depreciation cover, under your comprehensive car insurance policy can serve you well in situations of need. The depreciation attached to your insured vehicle will only increase with time. Say, if your insured vehicle was involved in an accident and the claim amount comes out to be Rs 50,000, and depreciation on your vehicle is Rs 20,000 and you do not have the zero-depreciation cover, the insurance company will only pay you Rs 30,000 after factoring in the depreciation costs. However, if you had opted for the zero-depreciation cover, the entire Rs 50,000 claim would be met in full by the insurance company.

Factors Affecting Zero Depreciation Premium

The inclusion of the zero-depreciation cover on your car insurance policy will result in an overall increase in insurance premiums. However, the long-term benefits of this cover would fully justify this higher premium outlay. Ideally, it is said to have an upward impact of approximately 15% on your car insurance premiums. Some factors which affect this cover are:

• Age of the vehicle
• Make and model of the vehicle
• Geographical location of the vehicle
• Insured Declared Value
• Fuel Type

Exclusions in Zero Depreciation Cover

While the benefits of zero depreciation insurance are aplenty, there are certain exclusions applicable to this coverage.

• Intoxicants: Those driving under the influence of intoxicants are excluded from the coverage during claims.
• Driver’s Licence: Your driver’s licence is an all-important document, which must be valid, to receive benefits through a claim.
• Compulsory deductibles: A deductible is a mandatory amount that you must pay, before the insurance company covers you for the rest of the damages. A zero-depreciation cover would also mandate you to pay your share.
• Mechanical Breakdowns: General breakdowns due to the insured vehicle’s own engine cannot be claimed through zero-depreciation cover.

Conclusion:

Purchasing a car is a big decision. With the right kind of add-ons to your basic policy, you will be safeguarding your own pockets. A zero-depreciation is a great add-on to have on your comprehensive car insurance policy.

Disclaimer: The above information is indicative in nature. For more details on the risk factor, terms and conditions, please refer to the Sales Brochure and Policy Wordings carefully before concluding a sale.