Does a Zero Depreciation motor insurance policy make a difference during claims?

What is Depreciation?

When you are talking about depreciation in motor insurance, it basically refers to the reduction in the value of your vehicle and its parts over time. This is mostly due to wear and tear, and the age of your vehicle (much like how you also gain some wear and tear as you grow older! 😆) Basically, the older your vehicle is, the higher its depreciation will be.

There are two main types of depreciation – the depreciation of the vehicle itself, and the depreciation of its various parts and accessories. 

When there is “partial loss”, such as if your vehicle has had some minor damage in an accident, then the depreciation of the parts will be considered. However, if there is a “total loss” like in the case of a theft, then the depreciation of the vehicle comes into play. 

In either case, when you file a claim, your insurer will usually deduct this depreciation amount before they make any payment.

 

The IRDAI has set rules for how the depreciation of vehicle parts should be calculated:

Vehicle parts

Depreciation

Parts with high wear and tear - rubber parts, plastic components, battery, tubes and tires, etc.

50%

Fiberglass parts

30%

Metallic and other parts

0% to 50%, based on the age of the vehicle

The depreciation of the full vehicle is based on its age of your vehicle:

Age of Vehicle

Depreciation

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%

So, what is a Zero Depreciation policy?

How will a Zero Depreciation Cover make a difference during Claim Settlement?

Will it affect your premium?

What’s the difference between a policy without Zero Depreciation and one that has it?

Apart from the change to your premium, you might be wondering how a Zero Deprecation policy is actually different from a regular standard comprehensive motor insurance policy (or one that covers for both any damages to your own vehicle and third-party damages). Here is how the two are different when it comes to claims:

Zero Depreciation

Zero Depreciation

Premium

Your comprehensive motor insurance premium will increase by about 15%.

The premium for this policy is lower as there are no add-ons

Claim settlement

Full coverage (you won’t be charged for your vehicle’s depreciation)

Your coverage will be based on the current value of your vehicle, minus the cost of depreciation

Your savings

Despite the slightly higher premium, you will have more long-term savings

Your main savings will only be on the extra premium

What are the benefits of having a Zero Depreciation Cover?

What’s not covered by Zero Depreciation?