Zero Depreciation Car Insurance: Meaning, Benefits & How it Works
What is Zero Depreciation Car Insurance?
Zero Depreciation add-on cover in a comprehensive car insurance policy ensures that the insurer covers the depreciation amount on the assessed parts as per the policy document. The benefits under the add-on can be utilized up to a maximum of specified number of times during the policy period.
Without the zero depreciation add-on cover, all insurers account for depreciation on your car parts and settle your claim after making the necessary deductions on account of depreciation. Having the add-on cover will ensure that there are no deductions for depreciation of parts.
Note: Zero Depreciation add-on cover has been filed as Digit Private Car Parts Depreciation Protect with Insurance Regulatory and Development Authority (IRDA) with UIN number IRDAN158RP0005V01201718/A0009V01201718.
What is Depreciation?
Depreciation is the decrease in cost of your car, due to its natural wear and tear due to its age. The older your car is, the higher is its depreciation.
How is Depreciation Calculated?
According to the Insurance Regulatory and Development Authority of India (IRDAI), following are the depreciation rates, on the basis of which the total depreciation of your car is calculated:
Parts wise |
Depreciation rate (%) |
||||||
Rubber, Nylon and Plastic Parts |
50% |
Fiber Glass |
30% |
Glass |
Nil |
Car Paint |
50% depreciation on the material cost of total painting charges. 25% of the total painting charges (in case of consolidated bill of painting charges) |
% of depreciation for metallic parts in vehicles
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% |
Exceeding 5 years but not exceeding 10 years |
40% |
More Than 10 Years |
50% |
% of depreciation for all the other parts including wooden parts in vehicles
Age of Vehicle |
% of Depreciation |
Below 6 months |
Nil |
Exceeding 6 months but not exceeding 1 year |
5% |
Exceeding 1 year but not exceeding 2 years |
10% |
Exceeding 2 years but not exceeding 3 years |
15% |
Exceeding 3 years but not exceeding 4 years |
25% |
Exceeding 4 years but not exceeding 5 years |
35% |
Exceeding 5 years but not exceeding 10 years |
40% |
More than 10 years |
50% |
The schedule of depreciation for fixing IDV of the vehicle
Age of Vehicle |
% of Depreciation for Fixing IDV |
Not Exceeding 6 months |
5% |
Exceeding 6 months but not exceeding 1 year |
15% |
Exceeding 1 year but not exceeding 2 years |
20% |
Exceeding 2 years but not exceeding 3 years |
30% |
Exceeding 3 years but not exceeding 4 years |
40% |
Exceeding 4 years but not exceeding 5 years |
50% |
Benefits of Zero Depreciation Car Insurance Addon
What is Not Covered Under Zero Depreciation Add-on Cover?
Under Zero Depreciation add-on cover, certain things in addition to the general exclusions listed under car insurance are not covered. Let us take a look at them in detail:
What are the Factors Affecting Your Zero Depreciation Car Insurance Premium?
Following are the factors that will affect the premium of your zero depreciation addon cover:
Why is a Comprehensive Policy With Zero Depreciation Add On Cover Better than a Policy Without Zero Depreciation?
A comprehensive policy is no doubt a great way to protect your car from all possible damages. However, during claims you will still be required to pay for your car’s part depreciation.
Difference between Comprehensive Car Insurance Policy With or Without Zero Depreciation Cover
|
Comprehensive Policy with Zero Depreciation cover |
Comprehensive Car Insurance without Zero Depreciation cover. |
What is it? |
A zero depreciation cover is an optional addon you can opt for in your car insurance policy. Having this addon in your plan ensures your insurer won’t charge for your car’s depreciation during claims and hence, you won’t be liable to pay for the cost of depreciation of your car’s parts during claims. |
A comprehensive car insurance policy is a type of car insurance policy that covers for your car’s own damages and third-party damages. This type of policy can further be customized for extensive coverage. |
Premium |
On opting for this addon, your comprehensive car insurance premium will increase by approximately 15%. |
The premium for a standalone comprehensive car insurance policy is lower than that of a comprehensive car insurance policy with addons. |
Cost of Depreciation |
Having a zero depreciation addon means you don’t need to pay for the cost of depreciation during your car insurance claims. |
In a comprehensive car insurance policy, you will be required to pay for the cost of depreciation of your car’s parts during car insurance claims. |
How much do you save? |
While you pay a slightly higher premium, your long term savings are high as you aren’t required to pay for your car’s depreciation costs during claims. |
The only saving you have is the extra premium you would save on by not opting for addons. |
Cost of Damage |
Your car insurance company is responsible for paying the depreciated cost of car parts. |
You are responsible for paying the depreciated cost of car parts. |
Depreciation Consideration |
Depreciation of different car parts including plastic, nylon, fibreglass, wooden parts, and car paint is NOT considered at the time of claims. |
You need to pay a fixed rate of depreciation on different car parts while filing claims. |
Role of a Zero Depreciation Cover During Claim Settlement
The main role of a zero-depreciation cover during claims is to save the money you’d be spending from your pocket. Let’s take an example to make this simple for you; If your total claim amount payable is Rs 20,000 and the total cost of your car’s part depreciation is Rs 6,000 then, without having a zero-depreciation cover- your insurer will account for this cost and only pay you Rs 14,000. However, if you have a zero depreciation cover then, you will receive the entire Rs 20,000 as your claim amount 😊
Things to Remember about Zero Depreciation
Zero Depreciation add on cover policy will not be valid once you have claimed for the specified number of times as mentioned in the policy document.
A Zero Depreciation only covers the cost of your car’s part depreciation during claims and doesn’t cover your compulsory deductibles.
Claim made by the insured under this add on are subject to terms and conditions of your Car Policy.
Why Should You Opt for a Zero Depreciation Cover?
If you are planning to buy a new car soon, then you should definitely opt for a zero-depreciation cover in your comprehensive car insurance policy. You’re already spending a whole lot of money for your new car, spending a little more on its insurance with the right add-ons will help to prevent you from spending any more money.
Additionally, if you find yourself in any of the following categories, you should definitely buy a Zero Depreciation Cover.
If you live or drive frequently in an accident-prone area.
If you have recently learned to drive a car.
If you cannot bear the sight of small dents and bumps on your car.
If you own a luxury car or have expensive spare parts.
If you wish to reduce your out-of-pocket expenses in case of any damage.