Car insurance is an essential purchase for any vehicle owner. To help his wife Priya understand the nuances of car ownership, Rohit entrusts her with the task of renewing their car insurance. Up for the challenge, Priya researches car insurance online and discovers various terms and coverages.
One term that captures her attention is zero depreciation car insurance. Intrigued, she now has many questions: What is zero depreciation in car insurance, and do they need it for their car?
If you, too, have similar questions, read on!
What is Zero Depreciation Car Insurance?
Zero depreciation car insurance is an add-on cover to a standard car insurance policy that does not factor in depreciation during claim settlements.
In simpler terms, zero depreciation cover means that if your car is damaged in an accident, the insurance company will cover the full cost of replacing or repairing the damaged parts without deducting any depreciation.
This add-on becomes a significant advantage compared to third-party car insurance (which only covers damage to others) or a standard policy (where the insurer considers the depreciation when settling claims).
What is Zero Depreciation Car Insurance Advantage?
Now that Priya has the answer to ‘What is zero depreciation in car insurance?’ She wants to know if it’s worth considering.
Zero dep insurance means a maximum claim amount. It is particularly beneficial for owners of new or luxury cars. Here are some key benefits:
- Higher Claim Amount: With zero depreciation add-on, you receive a higher claim amount, covering the full cost of repairs or replacement.
- Cost-Effective Repairs: Car repairs can be expensive, especially after an accident. Zero depreciation car insurance ensures minimal out-of-pocket expenses.
- Peace of Mind: Knowing you will get a higher claim amount can be reassuring and reduce financial stress in case of an accident.
What is Zero Depreciation in Car Insurance: Inclusions and Exclusions
Third-party car insurance is a basic form of coverage mandated by law. It covers damages to third parties but does not cover your own vehicle’s damage. On the other hand, zero depreciation car insurance means comprehensive coverage.
What is zero dep insurance inclusion coverage?
Repairs and replacements due to:
- Natural calamities like floods, earthquakes, landslides, and more.
- Man-made disasters like riots, vandalism, and terrorist attacks.
- Accidental damage
- Damage during transit
What is zero dep insurance exclusion coverage?
- Driving without a valid licence
- Driving under the influence of alcohol or drugs
- Normal wear and tear
- Mechanical or engine breakdowns
- Total loss of the car (when the repair cost equals or exceeds the Insured Declared Value)
How Does Zero Depreciation Cover Work in Car Insurance Claim Settlement?
Let’s consider two examples to understand what zero dep insurance means in the settlement process.
Example 1: With Zero Dep Car Insurance
Rohit’s car gets into an accident, and the total repair cost is ₹50,000. With zero depreciation cover, the insurer covers the entire amount. Rohit pays nothing out of pocket except the compulsory deductibles.
Example 2: Without Zero Dep Car Insurance
In the same scenario, without zero depreciation cover, the insurer considers the depreciation of parts. Let’s assume a 20% depreciation on parts worth ₹30,000. Rohit would receive ₹44,000 (₹50,000 - ₹6,000 depreciation), and he would have to pay the remaining ₹6,000 from his pocket.
What are the Factors Affecting Your Zero Depreciation Car Insurance Premium?
Here are some factors that affect the premium of car insurance online:
- Car’s Age: Newer cars have lower premiums for zero depreciation cover.
- Make and Model: Luxury or high-end cars might attract higher premiums.
- Claim History: A history of multiple claims can increase the premium.
- Geographical Location: Areas with higher traffic or accident rates can result in higher premiums.
Priya now understands what zero depreciation car insurance means. She is considering buying the add-on for her car. Thus, she can secure her investment by choosing zero depreciation cover and ensure peace of mind.
