Many
vehicle owners believe that their insurance will cover everything following an
accident. However, most of the time this is not the case. Most regular car
insurance’s compensation is based on the depreciated value of your car rather
than the original value.
Zero
depreciation cover is here to help and avoid those unforeseen on-ground costs
during the claims process, particularly on parts like bumpers, doors, or
plastic fittings. If you ever think why your friend received a better claim
settlement for the same damage/loss, this may be the add-on you were missing.
Continue reading to see how this could change your claim experience entirely.
What Is Zero
Depreciation Cover in Car Insurance?
Zero
depreciation cover (sometimes referred to as “zero dep” or “nil
depreciation” cover) is an optional add-on to your car insurance policy
that will pay the full cost of repairing or replacing the damaged parts on your
car.
Zero
depreciation cover differs from standard comprehensive policies, which will
adjust your claim based on the age of the parts and any wear and tear. If you
are covered under a zero dep option, you will get back the whole amount for the
cost of the repair, as well as the cost of the parts, including plastic, rubber
and fibre parts.
Zero depreciation car
insurance is particularly beneficial for newer cars or luxury vehicles, as it
increases the chances of the claim amount not affecting your out-of-pocket
expenses after an incident; however, a zero depreciation cover usually means a
higher premium, which may limit the claims available.
How Does Your Claim
Amount Change with Zero Dep Cover?
Zero
depreciation cover affects how much money you will receive when you have a
claim. If you don’t have this cover, your insurer will deduct depreciation on
parts as they settle your claim. When you have zero depreciation, your insurer
will not deduct depreciation.
Let’s
break that down clearly.
Without Zero Dep Cover: You Pay for Depreciation
Every
part of your car depreciates over time. This means that it loses inherent
monetary value. Suppose your vehicle gets damaged and needs a certain number of
parts replaced. In that case, the insurance company will consider how old the
parts are and reduce the amount of the claim according to a set depreciation
value for that part.
So
even if you are insured comprehensively, the insurance company will only pay
you the depreciated value of the parts, not the actual cost. That means you’ll
have to pay the rest out of pocket.
With Zero Dep Cover: No Depreciation Deductions
If
you include zero dep cover, the insurer will replace them with new parts regardless
of age. So if a bumper, door, or headlamp is damaged, you will not lose money
due to wear. This increases your claim amount. You pay significantly less on
your side, even for larger repair costs.
Let’s Look at a
Realistic Example
Suppose
your car meets with a minor accident and the front bumper, side mirror, and
headlight need replacement.
|
Particulars |
Without |
With |
|
Bumper Cost (Dep. 50%) |
|
₹10,000 fully paid |
|
Side Mirror (Dep. 40%) |
|
₹5,000 fully paid |
|
Headlight (Dep. 40%) |
|
₹8,000 fully paid |
|
Total Paid by Insurer |
₹12,800 |
₹23,000 |
|
Out-of-Pocket by You |
₹10,200 |
₹0 |
This
is a simplified example, but it shows the massive gap in claim amount. Even
with a comprehensive policy, you can cover thousands independently without zero
dep.
Who Should Consider
Adding This Cover?
Zero depreciation cover is beneficial as an
add-on to your car insurance policy if you want complete protection
against depreciation costs when making a claim. The following categories of car
owners should particularly consider adding zero depreciation cover:
●
New Car Owners: New cars lose value relatively quickly, and
car parts depreciate over time. Zero depreciation cover can mean repairs and
replacement parts will be paid for without the depreciation costs included.
● Luxury & Expensive Car Owners: Replacement parts for luxury and high-end
cars are often extremely expensive. This cover can save a considerable cost and
be the difference between claiming for a price and not, because depreciation is
taken away from claiming the full expense.
● Sports Car Owners: High-performance sports cars and their components can include expensive
parts, making zero depreciation cover a valuable option to outweigh the expense
of repairs or replacement.
● New or Inexperienced Drivers: They are considered a higher risk, and the zero
depreciation cover provides peace of mind due to the full repair costs.
● Drivers living in high-risk areas or with a higher likelihood of
accidents: The
zero-depreciation cover offers additional protection because of the greater
likelihood of damage claims.
Things to Know Before
You Buy Zero Dep Cover
There
are a few essential aspects that you need to know before purchasing a zero
depreciation (Zero Dep) cover for your car insurance:
● It is only available for New or Middle-Aged Cars: Zero-dep coverage is
frequently only offered to those with a vehicle under five years of age. Some
insurers will extend the cover to seven years, but your choices decrease as
your car ages.
● There is a limit on the number of claims: You may not be entitled to
unlimited zero-dep claims in a year. With most insurers, you are allowed only
one or two zero-tps claims during the policy term.
● It Raises Your Premium: You also pay 10% to 20% more for the
adder to your premium. However, if you have to make a claim, it usually allows
you to save more than you pay, especially if a repair involves many parts.
● Doesn’t Cover Engine Damage or Wear and Tear: Zero dep only waives the
depreciation on parts and not the car’s depreciation in general. There is no
coverage for engine oil, etc, tires, batteries, and mechanical breakdowns
caused by accidents.
● You Still Have to Pay Deductibles: Zero dep doesn’t mean your claim is
completely cashless. You must still pay your mandatory and voluntary deductible
for your base policy agreement.
● Only Works with Comprehensive Plans: If you only have third-party
insurance, you can’t buy zero dep. It’s an add-on benefit for cars insured
under comprehensive car insurance.
● More Benefits of Costly Repairs: If your car is a substantial parts
value, or less than 5 years old, zero dep helps you evade significant
out-of-pocket expenses after an accident or damage.
Zero
depreciation cover can be a significant benefit when the time comes to make a
claim. Instead of losing some of your value to part depreciation, you get a
larger and fairer payout from your claim. This can be especially handy if you
drive a new or high-tech car and don’t want repair bills as a surprise.
On
top of the possible low cost, you may save more on your repairs with this
add-on, even for a smaller cost on your premium. If you want complete peace of
mind with your claim, this is a worthwhile cover for your policy.
