What Is Zero Depreciation In Car Insurance?
When you buy a car, you also get a good car insurance cover for it. There are many attractive features available in car insurance. However, a car insurance plan does have some drawbacks also. The depreciation component is one such drawback. Because of this clause, you get lower claim amounts because of the age of the vehicle and its parts. To come around this issue, all you have to do is invest in a zero dep car insurance rider. Commonly, this rider is also known as Bumper-to-Bumper rider. What is zero depreciation in car insurance and how can it be of use to you? Read on to get all the answers.
What is Zero Depreciation in Car Insurance?
The insured declared value, or the IDV, of a vehicle, is its current market price. Like with all other things, a car also ages with time and its value drops. The same thing happens with the combustibles and other parts of the car. As a result, when you make a car insurance claim, the claim amount disbursed is calculated on the basis of the IDV. For example, if your vehicle is three years old, the IDV will be applied and the price of the car will be depreciated for three years. During a claim, you will get the amount based on this calculation.
To tackle this problem, you can buy zero dep insurance for car. It is usually available in the form of a rider along with the main car insurance plan. This rider protects the car against depreciation. When you make a claim, the zero dep insurance for car ignores the IDV and pays out the claim, based on the actual price of the car. This proves to be very handy and you get a much higher claim amount.
Who needs a Zero Depreciation Rider In a Car Insurance Plan?
The zero depreciation rider in a car insurance plan is best suited for:
- For a new driver, who has just learnt how to drive and hence is prone to accidents
- If you have recently bought a new car
- If you have a very expensive car as its spare parts would also be very expensive
- If you stay in an accident-prone zone
How does a Zero Depreciation Rider work?
Normally, whenever there is an accidental claim for your car, a rate of depreciation is taken into account. The depreciation rate is fixed by the Insurance Regulatory and Development Authority of India (IRDAI) as follows:
| Age of the car | % of depreciation |
| Cars less than 6 months | NIL |
| Cars more than 6 months old but < 1 year | 5% |
| Cars more than 1-year-old but < 2 years | 10% |
| Cars more than 2 years old but < 3 years | 15% |
| Cars more than 3 years old but < 4 years | 25% |
| Cars more than 4 years old but < 5 years | 35% |
| Cars more than 5 years old but < 10 years | 45% |
| Cars more than 10 years | 50% |
Also, there there is a deduction for the part that is replaced and subject to depreciation as well, such as:
| Car Components | % of depreciation |
| Tyre, rubber parts, battery, nylon, tubes and plastic parts | 50% |
| Glass and fibre materials | 30% |
| All other parts made of glass | NIL |
So, in case of a claim, the depreciated value would be reimbursed by the insurer and the remaining amount would have to be paid by the policyholder. However, with this add-on, the actual cost of the repair and the replacement would be borne by the insurer without any deduction. Hence your claim would thus become completely hassle-free.
There are multiple factors that determine the rate of premium for the zero-depreciation add-on for your car such as make and model of your car, the age of the car and the location of registration.
Benefits of Zero Depreciation Rider In Car Insurance Plans:
Now that you know what is zero depreciation in car insurance, here’s a look at the benefits you get when you buy the zero dep insurance rider:
- Fetches a higher claim amount
When you make a claim, the insurance provider instantly deducts the depreciation amount. This process will be financially challenging as the new replacement will cost much higher without any consideration of depreciation. When you buy zero dep insurance for car, you get compensated in totality. - Protects expensive vehicles
The zero dep car insurance is especially useful for the owners of fancy, expensive vehicles. These cars, along with their parts, are very expensive. Even a small repair can cost a lot of money. This is why you need to understand what is zero depreciation in car insurance and get this rider so that at the time of a claim, the entire amount is disbursed with any depreciation-related deductions.
- Reduces the self-pay burden
As stated, you only get a depreciated claim amount on a regular car insurance plan. However, if you attach the zero dep insurance for car rider, you stand to get a much higher claim amount. This makes it financially smooth for you and you practically get the entire amount from the insurer. As a result, you have a lower burden on yourself to clear the part of the dues the insurance plan doesn’t pay for owing to depreciation.
- Easy to get
The zero dep car insurance riders are easily and widely available. Practically every leading car insurance company in India offers this rider. You can easily attach the rider to your base motor insurance plan when you buy the car insurance plan online. The process is simple and the documentation is also uncomplicated, making it a must-buy rider.
- Inexpensive
The zero dep insurance for car is a very inexpensive add-on cover. Like most other forms of car insurance riders, the zero dep car insurance rider is also very affordable. And when you calculate the amount you pay for this rider and weigh the claim you stand to receive because of it, you see that it is highly profitable to have this plan in your kitty when buying a good, comprehensive motor insurance policy.
Keeping all these benefits in mind, it can surely be said that knowing what is zero depreciation in car insurance and then getting zero dep insurance for car proves to be tremendously beneficial. The expenses are very high these days and so you should make wise investments such as buying a zero dep rider to reduce your expenses in the long run.
Inclusions & Exclusions
Exactly what is zero depreciation in car insurance and what does this rider include? What are the exclusions? Here’s a list:
| Inclusions | Exclusions |
| The total vehicle (in case of theft or completely, irreparable damage) | Externally fitted accessories such as music systems or safety gadgets |
| Spare parts such as mirrors | Tyres and batteries |
| Cost of plastic fibre of the car and its parts | All cars and their parts that are more than five years old |
These are the common inclusions and exclusions of zero dep car insurance. However, the clauses differ from insurance provider to insurance provider. This is why you need to read the policy wordings carefully to understand what is covered and what is excluded in the zero dep car insurance rider.
How to Claim Zero Depreciation In Car Insurance Plans?
The claim process is quite simple. All you have to do, during the car insurance claim, is inform the insurance provider about the attachment of the zero dep rider in your plan. Make sure you inform the insurer about this. In your claim form, you will have an option to check whether or not you have already purchased this rider. Check the point and your claim will be settled accordingly. There is no limit to the number of claims you can make in a year, provided the total claim amount doesn’t surpass the sum insured value of the policy.
Conclusion
There are many components in car insurance, and the zero dep is an important component that you need to be aware of. Now that you know what zero depreciation in car insurance is and how beneficial it can prove to be, go ahead and get the rider at the earliest. As mentioned above, the process to buy the plan is very simple and it is an inexpensive add-on cove too. So go ahead and get the rider and increase the overall scope of your comprehensive car insurance policy.
