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When you have a car in your name, it is important that you also have a car insurance policy for the same. As per the Motor Vehicles Act, 1988 having a car insurance policy for every car that you possess is compulsory. Traditionally, there are two broad categories of car insurance - Third-Party Car Insurance and Comprehensive Car Insurance Policy. With third-party insurance, the damages that your car causes to a third party person/property are covered. Whereas a comprehensive car insurance policy covers not only the third-party damages but also the own damage faced by your car.
Comprehensive Car Insurance offers much wider coverage than the third-party cover. The policy also comes with the option of add-on covers. Add-ons are coverage benefits that can be bought by paying a little extra over the base comprehensive policy. One such add-on is Zero Depreciation and we are going to discuss it in detail.
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When you select the Zero Depreciation add-on, your car insurance policy is known as Zero Depreciation car insurance plan. This plan does not let depreciation reduce the value of your car and thus the claim amount doesn’t reduce. When you make a claim, the entire cost of the car parts is paid by the insurance company.
In a basic comprehensive car insurance policy, when you make a claim, the depreciation value of the car parts is deducted from the IDV of Car. This remaining cost you have to pay yourself. But if you have the Zero-dep policy, it covers the entire loss without deduction of depreciation value.
Let us take a look at this example, Reena bought a car worth INR 10 lakhs. Next year, she met with an accident, and the repair costs were INR 50,000. She had a basic comprehensive car insurance plan, and the company paid a claim of only INR 40,000. Reena had to pay INR 10,000 from her own pocket.
However, if she had a zero-depreciation add-on along with her base plan, she would have easily saved the INR 10,000 that she had to spend from her pocket.
The reduction in the value of an object over time is called depreciation. In simple language, depreciation is the loss of value of a product due to everyday wear and tear. For example, if you buy a car worth INR 5 lakhs today, if you wish to sell it one year later, its value cannot be the same and will decrease. This is because of depreciation. The older your car gets, the more it depreciates.
The rate of depreciation is fixed by the insurance Regulatory and Development Authority of India, IRDAI. The depreciation of your car is calculated on the basis of the following:
Rubber, Plastic parts, nylon and batteries | 50% |
---|---|
Fibreglass Components | 30% |
Wooden Parts | 5% in the first year, 10% in the second and so on |
Depreciation has a direct effect on the IDV of the car. Let’s see how:
Age of the Vehicle | Rate of Depreciation |
---|---|
Within 6 months | 5% |
6 months - 1 year | 15% |
1 year - 2 years | 20% |
2 years - 3 years | 30% |
3 years - 4 years | 40% |
4 years - 5 years | 50% |
Zero-Depreciation will be suitable if someone:
With your comprehensive/own damage standalone car insurance policy, you can select Zero-Depreciation as an add-on. Make sure you do research about the various car insurance plans that are offered in the market today. Making a comparison will help you select the best policy that too in your budget.
When buying the policy online, you can either visit the company’s official website or you can visit an online insurance aggregator website. Once there, follow the steps given below:
The cost of adding Zero Depreciation add-on cover will depend on the following factors:
Keeping these factors in mind, it can be said that adding a Zero Depreciation car insurance would cost almost 15% to 20% more than a standard comprehensive car insurance policy.
Let us understand the benefit of a Zero-Depreciation policy, with the help of an example. Suppose, you got into an accident and the fibreglass of the car gets damaged. The repair cost is going to be around INR 5,000. If you have a standard comprehensive policy, it would cover only INR 3,500 of the cost, meaning INR 1,500 would be reduced because of depreciation and would be paid by you. Whereas, in the Zero-Depreciation policy that would not have happened.
Here’s a list of other benefits of a Zero-Depreciation policy:
Being a part of comprehensive car insurance, Zero-Depreciation policy also has a wide cover, however, there are certain exclusions, such as:
Kind of Car Insurance | Cost of Premium | Cost of Repair | Settlement of Claim | Age of the Vehicle |
---|---|---|---|---|
Basic Comprehensive Policy | Cost is comparatively less | Part-payment is done by the insurance company, the policyholder pays too | A deduction is made on the basis of depreciation rate | Can be taken for all vehicles on the road |
Zero Depreciation | Almost 15% to 20% costlier | The insurance company pays a big share | Depreciation rates do not apply | Only vehicles less than 5 years old are eligible |
When you buy a car insurance policy, you also have to get it renewed on a regular basis. To renew it, you simply need to visit the official website of the car insurance company and select ‘Renewal’. The online renewal process is self-explanatory and very simple.
However, if the policy has expired, you would have to request a renewal with the company. A surveyor will come to assess your car and only when he approves, you would be able to renew the policy.
Zero-Depreciation car insurance is surely very promising, especially when you have a new car. However, you must consider the following factors when opting for it:
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Yes, most companies allow a claim twice in a year, however, it is best to check the policy details with the car insurance company that you select.
Buying a zero depreciation cover can help you save a lot, especially if you have bought a new car. To protect your car from damages, it is a wise option to invest in a zero-dep policy.
Zero depreciation cover can be bought for cars that are less than 5 years old.
Your Zero-Dep car insurance would cover all parts of the car, but remember that tyres are covered at 50% only. However, it is best to check the details with the car insurance company that you select.
A zero depreciation policy can be bought for cars that are less than 5 years old, so yes, you can buy it after 3 years also. However, keep it in mind that for a zero-dep, you pay almost 15-20% extra. Weigh the options of spending so much on an old car, and then invest.
Yes, when you do not make any claims during a policy year, you are entitled to a discount, when you renew your policy. You can avail the same under zero depreciation car insurance.
Yes, it is transferable. The insurance policy is in your name, so if you are selling or buying a used car, make sure that the policy is transferred. When making a claim the name of the policyholder and the car owner must be the same.
Zero-Depreciation car insurance is a part of comprehensive insurance itself. However, in a comprehensive policy, only part payment is done by the insurance company, the policyholder pays for the depreciation of car parts. Whereas, in a zero-dep policy, depreciation rates do not apply. Hence, a policyholder receives the full claim amount.
Yes, you can. You can either visit the company’s official website or you can visit an online insurance aggregator website. Once there, follow the steps given below:
A Zero Depreciation car insurance would cost almost 15% to 20% more than a standard comprehensive car insurance policy. So, your premium would increase.