What Is Zero Depreciation Car Insurance Cover?
Zero depreciation is an additional benefit (add-on) that every car owner can enjoy at the cost of paying an extra/higher premium. Zero depreciation is usually not included in the standard/comprehensive no-frills insurance policy.
At the time of insurance claims, every insurance company always calculates and applies the depreciation rate to decide the amount payable (with reference to the damaged part of the car) for settling the claim. The difference in cost between the market price of the new part and depreciated part needs to be shelled out by the insured/car owner.
With zero depreciation add-on, when you file an insurance claim due to damage/loss to your car, the insurer covers the entire cost without accounting for/counting in the vehicle’s depreciation. Zero deprecation is an attractive prospect for customers who want a smooth claim settlement in the future, along with peace of mind. For a brand new car, buying this add-on is definitely a worthwhile investment as long as paying the additional premium doesn’t burn a hole in the owner’s pocket.
What Is Depreciation Rate In Car Insurance?
Though the depreciation rates taken into account vary from one insurance company to another, there are some standard policies followed by every company. Some parts of the car age faster than the others. Hence the depreciation value is higher for them. Depending on these factors, the insurer applies different depreciation rates for different parts of the car.
Rubber/plastic parts, tyres/tubes, battery etc. are susceptible to maximum amount of wear and tear. Hence, the depreciation rates applied on them are usually higher compared to other parts like fibre glass, etc. The depreciation of metallic parts are based on the age of the vehicle.
Some Important Aspects Of Zero Depreciation:
- Applicable only on new cars
Usually, only new cars can avail the zero depreciation add-on. A certain age limit is given by the insurer, with regards to the same. If your car is older than the specified limit, it is not eligible to enjoy this add-on.
- Compulsory excess
The coverage offered is not 100%, always. Some insurers don’t cover normal wear and tear and mechanical breakdown under this add-on. Every customer who has taken a zero depreciation has to pay a mandatory policy excess. This is known as compulsory excess.
- Restriction on number of claims
A zero depreciation add-on cover may limit the number of claims that can be made annually. Again, this may vary from one insurance company to another.
