Zero depreciation car insurance meaning: it is also known as NIL depreciation or Bumper to Bumper car insurance. It is a car insurance policy that leaves out the depreciation factor from the coverage, thus giving you complete cover. It means that if your car gets damaged due to a collision, no depreciation is subtracted from the coverage of wearing out of any body parts of the car excluding tyres and batteries.
The insurance company will pay out the entire cost of the body part for replacement.
A car insurance with zero depreciation cover helps protect your car against all physical damages caused to the car without factoring in the element of depreciation.
Although a standard motor insurance policy covers you against losses arising in case your car is damaged or stolen when you file for a claim settlement, the compensation is received after a standard deduction of depreciation.
On the other hand, a car insurance with zero depreciation cover can fetch you the entire compensation amount. A zero depreciation add-on cover can be availed for brand new vehicles and also can be opted for at the time of policy renewal.
Benefits Of Zero Depreciation Car Insurance Cover
There are various benefits. This policy helps curb out-of-pocket expenses since depreciation cost is not taken into account while filing for a claim settlement.
- Most of your claims regarding the insured parts are settled without taking the depreciation amount into consideration.
- It adds more value to the basic automobile insurance coverage and makes your investment almost NIL
With this cover, you can be assured of a complete peace of mind. Also, with all major insurers offering this cover, you can save yourself a lot of hassle by purchasing a nil-depreciation cover by paying a little extra premium.
The Importance of Having Zero Depreciation Car Insurance
Car insurance is extremely helpful. It protects you from the financial impact of numerous unfortunate events and gives you complete peace of mind from the perils of the road.
With a comprehensive car insurance policy, you get coverage against:
- Accidents
- Theft
- Flooding
- Vandalism
- Earthquakes and several other man-made & natural calamities.
However, there is one thing that escapes the cover of a standard car insurance policy – that is depreciation!
Depreciation is the reduction in value of your car and its parts due to wear and tear. In case of a claim, the insurance company will provide compensation based on the depreciated value of the vehicle and its parts. This means that the policyholder has to cover the gap between the depreciated value of parts and their actual replacement cost.
Fortunately, you can easily bypass depreciation & its effect on your claims by opting for the depreciation waiver or zero depreciation add-on. With this optional cover, your policy will offer full compensation for part replacements. This will ensure higher payouts and lower out of pocket expenses in case of a claim.
Super isn’t it! Want to know more? Come on, let’s understand how depreciation waiver or zero depreciation car insurance works.
Difference between Comprehensive policy vs Zero dep Insurance policy
| Comprehensive policy with Zero Dep cover | Comprehensive policy without Zero dep cover | |
| Premium amount | Slightly higher than a normal comprehensive policy | Lower than a policy with the Zero Dep addon |
| Claim settlement amount | Higher as depreciation is not considered | Lower as depreciation is considered for all body parts that need to be repaired |
| Repairing of Plastic parts | With the Zero Dep addon, no depreciation is considered for such parts | 50% depreciation on such parts are consideredbefore paying the claim |
| Age of the covered car | With Zero Dep addon, the depreciation rates are considered as nil | With age, the depreciation of your car keeps increasing and will not be covered in the claim |
A Comprehensive policy without a Zero-Depreciation is ideal if your car is brand new or you think you are going to buy a new one very soon.
A Comprehensive policy with a Zero-Depreciation add on is ideal if you do not want any bummers at the time of claims, and don’t want to spend a penny from your pocket in case of an emergency.
Factors to Consider Before Opting for Zero Depreciation Car Insurance Cover
Here are the factors you need to keep in mind while opting for a zero depreciation car insurance:
- The car that you want to insure should not be more than 3 years of age to be eligible for zero depreciation car insurance add-on cover.
- Only the depreciated value of the car parts are replaced on basic zero depreciation car insurance plans.
- Zero depreciation car insurance offers a higher coverage than a basic car insurance plan, and therefore, attracts a higher premium. Therefore, you can consider zero depreciation car insurance only when you would be able to pay a higher premium amount.
- Zero depreciation car insurance add-on is especially recommended for owners of luxury cars or car owners who are residents of high-risk locations.
- Claims on zero depreciation car insurance can be made in certain specific cases to limit the number of claims for minor issues like dents in the car.
- 50% depreciation is deductible on car batteries and parts of the car that are made of plastic, rubber and nylon, and 30% depreciation is deductible
- The deductible amount for depreciation on wooden car parts is determined by the age of car. The usual depreciation value is 5% in the 1st year, 10% in the 2nd year and so on.
FAQs:
- Can I buy a zero depreciation add-on cover after 5 years?
The Zero Depreciation cover is only applicable to new cars of up to five years old. If your car is more than five years old, you should consult your insurer for a suitable course of action. For cars older than 5 years, Zero-Dep is offered but only from offline sources.
- How many times am I allowed to make claims for a zero depreciation car insurance plan?
Generally, there are no restrictions on the number of claims you can make under the car insurance policy in a year.
However, suppose you have opted for a Zero Depreciation cover, there may be restrictions on the number of claims you can make in a year under the Zero Depreciation cover. The number of claims allowed under this cover varies from one insurer to another.
- If you have purchased a Zero Depreciation cover for the car insurance policy, the insurer will not consider the depreciation rate when settling claims. However, there may be a limit on the number of claims you can make under this cover in a year.
- Is tyre covered under zero depreciation insurance?
Not all the repairing expenses are covered under Zero Depreciation coverage. There are certain things which are excluded. Mainly, the accessories that are not part of the standard product are not included in the coverage. The insurers do not include batteries or tyres either.
Again, the mechanical breakdowns due to wear and tear are also not covered. The terms and conditions differ from company to company.
- What is included in the policy?
Zero depreciation car insurance policy offers 100% coverage for all fibre, rubber and metal parts without deduction of depreciation. It does not cover engine damage due to water ingression or oil leakage. Any mechanical breakdown, oil change or consumables are also not covered in this policy. The policy comes with a limit on the number of claims you can put in a year.
- Who pays for the policy?
In a zero depreciation car insurance policy, the entire claim amount is paid by the Car Insurance Company without considering the depreciation on the value of the car. Obviously, you have to pay slightly more in terms of your premium. However, this add-on feature is highly recommended to everyone considering the fact that it eliminates the possibility of any out-of-pocket expense from the owner.
- What factors are responsible for affecting premium paid for zero depreciation car insurance?
The three main factors that affect the premium paid towards your zero depreciation car insurance policy includes car’s Age, car’s Model and location in which you are based.
1.Age of your car
Since a zero depreciation add-on is directly related to the aging of your car and its parts, the age of your car plays a huge factor in determining the premium for your zero depreciation add-on cover.
2. Model of your car
In car insurance, a lot depends on the model and type of your car. Since the cost of its parts too will depend on it. Therefore, the kind of car you have also plays a huge factor in determining the cost of your zero depreciation add-on cover.
3. Location of your car
Every city and the risks it is faced with is different. Therefore, in a car insurance, your premium- including the additional premium of your zero depreciation cover will be dependent on the city you drive your car in.