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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.

Also read - 

What is Zero Depreciation Car Insurance?

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. 

What is Depreciation?

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.

How is Depreciation Calculated?

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 batteries50%
Fibreglass Components30%
Wooden Parts5% 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 VehicleRate of Depreciation 
Within 6 months5%
6 months - 1 year 15%
1 year - 2 years20%
2 years - 3 years30%
3 years - 4 years40%
4 years - 5 years50%

Who Can Opt for Zero Depreciation Car Insurance?

Zero-Depreciation will be suitable if someone:

  • Has bought a brand new car
  • Has bought a new luxury car and its parts are quite expensive
  • Is a learner driver and is more at risk of accidents
  • Uses his/her car very often and thus want a suitable coverage
  • Lives in an accident-prone area

How to Buy Zero Depreciation Car Insurance?

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:

  • Enter your car’s registration number
  • Submit your personal details such as name, mobile number and email address
  • Submit the car details like- make, model, variant, registration year, etc
  • If you are switching companies, give the details of the previous policy
  • Select Comprehensive/own damage  Car insurance and select Zero-Depreciation as an add-on
  • You may select any more add-on covers if required
  • Check the premium and pay it online

Cost of Adding Zero Depreciation Add-on Cover

The cost of adding Zero Depreciation add-on cover will depend on the following factors:

  • Age of the car
  • MMV- make, model and variant
  • Registration City
  • The Car Insurance company

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

Key Features & Benefits of Zero Depreciation Car Insurance 

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:

  1. Saves you Money
    When you have a Zero-Depreciation cover, you need not spend money from your pocket in case a claim is to be made. Whereas, without a Zero-Dep policy, you have to bear the cost of depreciation.
  2. Claim Amount becomes Higher
    When you shield your car with a Zero-Depreciation policy, the claim amount will not be reduced because of the depreciation rates otherwise applicable.
  3. Freedom from Worry 
    Your Zero-Depreciation policy will ensure that you do not have to spend during claims and thus rather than worrying about the repair cost, you can sit back and relax.

What is not Covered in Zero Depreciation Car Insurance?

Being a part of comprehensive car insurance, Zero-Depreciation policy also has a wide cover, however, there are certain exclusions, such as:

  1. If you do not have a valid Driver’s Licence, you would not be able to make any claims
  2. A Zero-Depreciation policy can be bought only for cars that are less than 5 years old
  3. If you drive under the influence of alcohol or any other intoxication, you would not be able to make a claim
  4. Zero-Depreciation policy does not cover clutch oil, engine oil, coolant etc.
  5. Compulsory deductibles in your plan, if any, will not be covered under the Zero-Depreciation policy
  6. If your car suffered damages when you were using it for any illegal or malicious activities, your claim would be rejected
  7. Unless you have it as an add-on, your comprehensive car policy will not cover the mechanical breakdown costs.

How Zero Depreciation Cover Saves Money at the Time of Claim Settlement?

Kind of

Car Insurance

Cost of 

Premium

Cost of 

Repair

Settlement of Claim

Age of the 

Vehicle

Basic Comprehensive PolicyCost is comparatively lessPart-payment is done by the insurance company, the policyholder pays tooA deduction is made on the basis of depreciation rateCan be taken for all vehicles on the road
Zero Depreciation Almost 15% to 20% costlierThe insurance company pays a big shareDepreciation rates do not applyOnly vehicles less than 5 years old are eligible

Renewal of Zero Depreciation Car Insurance

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. 

  • First, you would have to enter your name and contact details
  • Enter Age, Make, Model, Variant, Registration Number and Year of your car
  • Select the type of policy, which is comprehensive car insurance and add zero-depreciation as an add-on
  • If you are renewing the policy before its expiry date, you will simply need to pay the premium and the policy will be renewed.

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.

Factors to be Considered While Opting for Zero Depreciation Cover

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:

  1. Premium Cost
    Remember, Zero-Depreciation car insurance will cost you more than a basic comprehensive policy.
  2. Number of Claims
    There is a limit on the number of a car insurance claim that you can make in a policy year. Before you buy Zero-Depreciation car insurance, you must check about the same from your insurance company.
  3. The City you Live In
    If you live in a metro city, the traffic in your area would be much more than a Tier II or Tier III town and thus your chances of having an accident are more. Thus, it is advisable to opt for zero depreciation cover. However, in case you are in a smaller city, opting for a basic comprehensive policy might be adequate.
  4. Availability
    Zero-Depreciation car insurance is available only to cars that are less than 5 years old. So, before you finalise the policy, make sure your car is eligible for this car insurance plan.

Also read - 

Zero Depreciation Car Insurance FAQs

  • 1. Can I claim for zero depreciation insurance twice in a year?

    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.

  • 2. Is it worth to opt for zero depreciation cover?

    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.

  • 3. Is zero depreciation cover applicable only for new cars?

    Zero depreciation cover can be bought for cars that are less than 5 years old.

  • 4. Are tyres of my car covered under zero depreciation cover?

    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.

  • 5. Can I get zero depreciation after 3 years?

    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.

  • 6. Can I get no claim bonus under zero depreciation car insurance?

    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.

  • 7. Is Zero depreciation car insurance transferable?

    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.

  • 8. How is Zero depreciation insurance different from comprehensive car insurance?

    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.

  • 9. Can I buy a Zero-Depreciation cover online?

    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:

    • Enter your car’s registration number
    • Submit your personal details such as name, mobile number and email address
    • Submit the car details like- make, model, variant, registration year etc
    • If you are switching companies, give the details of the previous policy
    • Select Comprehensive Car insurance and select Zero-Depreciation as an add-on
    • You may select any more add-ons, if required
    • Check the premium and pay it online
  • 10. How opting for Zero-Dep will affect your premium?

    A Zero Depreciation car insurance would cost almost 15% to 20% more than a standard comprehensive car insurance policy.  So, your premium would increase. 

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