A zero depreciation car insurance is a popular option for car owners seeking comprehensive coverage without the impact of depreciation during a claim settlement. It is also known as bumper-to-bumper car insurance. This type of insurance provides a higher level of protection as compared to a regular insurance policy, thus making it an attractive choice for car owners who want to minimise out-of-pocket expenses in case of damage or loss.
How It Works?
In a standard car insurance policy, the insurance company considers the depreciation of car parts while settling a claim. This means that if your car is damaged, the insurer will factor in the depreciation of the replaced parts, and you will receive a reduced claim amount. Zero depreciation insurance eliminates this depreciation, thus ensuring that you receive the entire cost of the replaced parts during a claim.
Whenever a vehicle meets with an accident, multiple parts get damaged, say, for instance, the bumper, headlights, and so on. In addition, garage bills could set you back by around Rs 25,000-30,000.
Says Animesh Das, Chief Underwriting Officer, Acko General Insurance: “In case of standard coverage, the policyholder ends up paying 25-30 per cent of this bill as depreciation from his/her pocket. In case of zero depreciation, this part (as the name suggests) becomes nil. Hence, the term zero depreciation.”
Premiums And Coverage
While zero depreciation insurance provides comprehensive coverage, it comes with a slightly higher premium as compared to regular insurance policies. The increased cost is justified by the enhanced protection and the reduced financial burden on the policyholder in the event of a claim.
Says Das: “The premium usually depends on the age of the car, with older cars incurring different costs. Additionally, factors such as no claims bonus (NCB), insured declared value (IDV), and the make and model of the car, impact the cost of parts. This further influences the premium for this add-on cover.”
Typically, the premium for zero depreciation coverage can be 15-20 per cent higher than that on a standard policy. However, the additional cost is often deemed worthwhile by car owners who prioritise complete coverage and want to avoid significant out-of-pocket expenses during a claim.
Benefits Of Zero Depreciation Insurance
Here are the benefits of a zero depreciation insurance policy.
Full Claim Settlement: The most significant advantage of a zero depreciation insurance policy is that you receive the entire cost of repairs or replacements without any deduction in depreciation. This is especially beneficial for high-end or luxury cars with expensive spare parts.
Cost Savings In The Long Run: Despite the higher premium, zero depreciation insurance can result in cost savings over time, as the policyholder avoids bearing the brunt of depreciation-related deductions during claims.
Peace Of Mind: Car owners enjoy peace of mind knowing that they are adequately protected, and in the event of an accident, they won’t face unexpected expenses due to depreciation.
Things To Consider Before Taking A Zero Depreciation Insurance
While zero depreciation insurance offers comprehensive coverage, it’s essential to consider the age of the vehicle. Zero depreciation coverage is typically available for new cars up to a certain age, often limited to five years. After this period, the policyholder may need to switch to a standard insurance policy.
According to experts, zero depreciation car insurance in India provides an excellent option for car owners seeking maximum coverage and minimal out-of-pocket expenses during claims. While the premiums may be slightly higher, the benefits often outweigh the costs, which makes it a popular choice for those who prioritise comprehensive protection for their vehicles.
