When you buy a comprehensive car insurance policy, you have the option to choose from a range of add-ons to boost the coverage and customize the policy as per your requirements. Among the options available to car owners like engine protection, consumables cover, roadside assistance, etc., a Zero Depreciation Cover or a bumper-to-bumper cover is the most popular one. In simple terms, a Zero Depreciation Cover ensures that the insurer does not consider depreciation of the car or its parts while calculating the claim settlement amount.
In this article, we will talk about this cover and help you understand why you should opt for one during car insurance renewal or purchase.
What is a Zero Depreciation Cover?
When you buy a car insurance policy, the insurance company offers financial protection against damages or losses to your car total/partial due to an accident or a mishap. However, a car is a depreciating asset. This means that as the car ages, it goes through wear and tear. All materials used in making the car like glass, metal, plastic, etc. depreciate in value. Hence, if your car gets damaged due to an accident or a collision and you file a claim, the insurance company does not cover the entire cost of repairs. It pays for the replaced parts after deducting the depreciation amount. Hence, when you file a claim, you don’t receive the sum insured amount.
If you add a Zero Depreciation Cover to your car insurance policy, then you don’t have to worry about the insurer deducting depreciation while honouring your claim. This cover offers 100% coverage for all parts of the car covered under the policy. However, it does not cover any mechanical breakdown, damage due to water ingression or oil leakage. There are limits on the number of claims you can file in a year with a Zero Depreciation Cover. It is preferred by people with new and luxury cars, inexperienced drivers, new drivers, people living in accident-prone areas, etc.
Why should you buy a Zero Depreciation Cover?
While we have explained the concept of zero depreciation, to understand its benefits and why you should buy it, let’s look at the rates at which depreciation is calculated for various parts:
| Parts | Depreciation Rate |
| Rubber, Plastic, Nylon, Tyres, Tubes, or Batteries | 50% |
| Fibre Parts | 30% |
| Glass Parts | Nil |
Rate of depression of all parts, including wood:
| Age of Car | Rate of Depreciation |
| Less Than 6 Months | Nil |
| More Than 6 Months to 1 Year | 5% |
| More Than 1 Year to 2 Years | 10% |
| More Than 2 Years to 3 Years | 15% |
| More Than 3 Years to 4 Years | 25% |
| More Than 4 Years to 5 Years | 35% |
| More Than 5 Years to 10 Years | 40% |
| More Than 10 Years | 50% |
Hence, if you have a car that is, say, 4.5 years old and you meet with a small accident. When you file a claim, the insurer will deduct 35% as depreciation and not pay you more than 65% of the claim amount. However, if you have purchased a Zero Depreciation Cover, then this will not be deducted.
Hence, this cover ensures that your claim amount is not affected by the age of the vehicle, and you don’t have to bear the partial cost of replacing certain parts. While you have to pay a premium for the cover, if you own a vehicle that has costly parts or are new to driving or live in an area prone to accidents, then this cover makes complete sense for you.
Keep the following points in mind before buying a Zero Depreciation Cover:
- The car should not be very old since most insurers have a limit on the age of the car for offering this add-on
- Ensure that you go through the inclusions and exclusions of the add-on.
- The premium will be higher. Use the zero depreciation car insurance premium calculator to know the final premium amount as offered by insurers on their websites.
- It is available with comprehensive car insurance policies and not with third-party policies
- Some insurers might insist on getting the repair done at a network garage to avail of the zero depreciation benefit
Summing Up
Most car owners don’t consider depreciation while purchasing car insurance in India. Hence, when an accident occurs and the file a claim for receiving reimbursement for the repairs, they are surprised to find the amount to be less than their claim amount. Although most insurers have customer service teams to explain the details to them, it can cause expenses that can easily be avoided. A Zero Depreciation Cover is ideal for vehicles that are either more prone to accidents or costlier to repair than other cars.
Hence, whether you are buying a new car or looking for car insurance renewal online in India before you choose the add-ons for your car insurance policy, ensure that you assess your insurance requirements carefully. Also, research the market and compare policies before you sign the dotted line. Good Luck!