Zero depreciation car insurance
Depreciation is not covered under car insurance plans. That is why, when a claim is made, the company does not pay the total costs incurred in repairing or replacing the damaged parts of the car. The claim is paid after deducting the applicable depreciation charge on the different parts of the car. Here is the depreciation schedule applicable on different parts of the car –
|Parts of the car
||Parts of the car
|Parts of the car made with plastic, nylon, and rubber
|Fibreglass parts of the car
|Wooden and metallic parts of the car
||Depreciation depends on the age of the vehicle. It is 5% after the first year, 10% after the second year, and so on.
Since the rate of depreciation is high, the claim is highly reduced. A zero depreciation add-on is, therefore, available with car insurance policies. This add-on, when selected, does not factor in depreciation when the claim amount is calculated. The company pays the actual costs of repairs or replacement of the different parts of the cars irrespective of the applicable rate of depreciation. Thus, the zero depreciation add-on helps increasing the amount of claim payment.
Important aspects of zero depreciation
There are some important factors which are associated zero depreciation cover available in car insurance policies. These are the important aspects of the cover which policyholders should remember when buying it –
- It is available as an add-on
Zero depreciation cover is not inbuilt in the car insurance policy. It is an add-on and policyholders would have to choose the add-on when buying or renewing their car insurance policies.
- Additional premium is required
Since the zero depreciation cover is an optional add-on, to choose the cover the policyholder would have to pay an additional premium along with the premium of the basic car insurance policy.
- Available in comprehensive plans
There are two types of car insurance policies – third party liability policies and comprehensive plans. Add-ons are available only in comprehensive car insurance plans. Therefore, zero depreciation add-on can be selected only if the policyholder buys a comprehensive car insurance policy.
- Available for newer cars
This add-on is available only for cars which are up to 5 years old. If the car is older than 5 years, the add-on is not allowed to be taken.
- Applicable only twice
The benefits of the cover can be taken for a maximum of two times during the entire policy period.
Difference between zero depreciation and comprehensive car insurance policy
A zero depreciation cover should not be confused with a comprehensive car insurance policy because both these covers are different. Here’s how –
- In a comprehensive plan a lot of coverage benefits are offered. Thus, it is an all-inclusive plan. In case of zero depreciation cover, however, coverage is only offered for the depreciation related reduction of the claim amount. Any other losses suffered by the car are not covered under this policy.
- A comprehensive policy is a type of a car insurance plan. A zero depreciation cover is an add-on which is available as an option.
- Given the wide scope of coverage of comprehensive plans, the premium rates are high. Since zero depreciation cover is an optional add-on and it also has a limited scope of cover, the premiums are very low
- Comprehensive car insurance policies can be bought for any car irrespective of its age. However, for zero depreciation cover, the car’s age is important. The car should not be more than 5 years old for the policyholder to avail the cover
- Claims under a comprehensive plan are paid for any number of times as long as the IDV of the policy is not exhausted. Coverage under zero depreciation is paid only twice during then entire coverage period of the car insurance policy.
Benefits of zero depreciation car insurance
A zero depreciation cover is quite beneficial for the car. Here are the benefits of the cover –
- Since the car’s parts are expensive, repairing it involves higher cost. In case of new or high-end cars, the repairing costs are quite substantial. If depreciation is factored in the costs, the claim becomes quite low. As a result, the out-of-pocket expenses of the policyholder increase. Such expenses might not be affordable for the policyholder especially when the car is a premium car. In such cases, the zero depreciation cover ensures that the effect of depreciation is not taken into consideration at the time of claim. Thus, the policyholder’s out-of-pocket expenses are nullified and the cover provides financial security
- The premium of the cover is very low and affordable against the coverage which is it promises to provide. Thus, with a very little additional premium outgo the cover ensures a substantial coverage
- A zero depreciation cover, therefore, enhances the scope of coverage of the car insurance policy.