Zero Depreciation: Car Insurance Add-on    

You’ve already heard your car is a depreciating asset unless it’s a rare vintage. That’s why insurance providers don’t offer full coverage for costs associated with repairing a vehicle’s damaged parts. But a zero depreciation cover lets you easily maximise the claim amount for accidental damage.

Whether you buy a brand-new car or are a frequent traveler, a zero-depreciation add-on can help you leverage the full potential of your comprehensive car insurance coverage. 

In this article, let’s explore the features and benefits of a zero depreciation cover.

What Is Zero Depreciation Add-on?

A zero depreciation cover is an add-on for comprehensive car insurance cover that ensures your vehicle isn’t subject to any depreciation deductions during claim settlements.

In simpler terms, if your car suffers any damage from an accident, the insurer will cover the entire cost of repairing and replacing parts, irrespective of the depreciated value of your car.

Let’s put this into perspective with an example. 

Suppose your one-year-old car suffers damage to its bumper in a minor accident and requires replacement. The cost of a new bumper is ₹ 10,000. The standard depreciation rate for plastic parts, including bumpers, is often around 50% after the first year.^[1]

Without the Add-on :

Without a zero depreciation add-on, the insurance company applies a 50% depreciation rate on the bumper’s cost, which means it will cover only ₹5,000. So, you must pay the remaining ₹5,000 from your pocket to replace the bumper.

With the Add-on :

The insurance company won’t factor in depreciation if you have this add-on. They’ll cover the entire cost of the new bumper, which is ₹10,000. As a result, you don’t have to pay anything out of pocket.

Key Features Of Zero Depreciation Cover

Here are some notable features of a zero depreciation cover:

• Valid for newer cars: You can avail of a zero depreciation add-on usually only for vehicles less than 5 years old. However, some insurers may provide this add-on for a few more years.
• Limit on multiple claims: In most cases, you can only make a maximum of 2 claims in the policy period. However, you may find insurance providers who allow for more and even unlimited claims.
• Higher premium: To add a zero-depreciation rider to your comprehensive car insurance coverage, you might be asked to pay a higher premium. 

Benefits Of Zero Depreciation Add-on

Let’s have a quick look at the zero depreciation benefits:

• Higher claim payout: With this add-on, the insurance provider doesn’t deduct depreciation from the claim amount. As a result, you get a higher payout for any repairs or replacements, reducing your out-of-pocket expenses.
• Affordable: While it slightly increases the premium of your policy, the cost is relatively low especially when compared to the potential savings on repair costs.
• Peace of mind: Knowing that your car insurance policy will cover your own damages, that too in full, you can confidently take your car on the road for stress-free rides.

When To Opt For Zero Depreciation Add-on?

Here are some instances when you must get a zero depreciation cover :

• Luxury car owner: Luxury vehicles tend to have expensive parts, and they even depreciate faster. This add-on prevents you from bearing heavy repair costs out of your pocket. 
• Inexperienced driver: New or inexperienced drivers are at a higher risk of minor accidents. So, this zero depreciation add-on is essential to prevent expenses in case of frequent claims.
• Accident-prone areas: A zero depreciation add-on protects you against repair costs if you live in an area with a high risk of accidents.
• Expensive spare parts: If your car has costly spare parts, a zero depreciation add-on ensures the insurance payout covers the entire cost of replacements and repairs. 

How Is Zero Depreciation Premium Calculated?

Insurance companies consider the following factors to calculate premiums for zero depreciation cover:

• Registration location: The premium varies depending on where you register your car. In cities with more traffic and a higher risk of accidents, you will have to pay more for this add-on.
• Car’s age: Depreciation is directly linked to your car’s age. If you own an older car, the add-on premium will be higher. 
• Fuel and engine type: Cars with high-performance engines or those running on premium fuels have expensive parts. So, the premium for their coverage is also higher. 

Key Takeaways

A zero depreciation add-on protects you from out-of-pocket expenses when repairing or replacing your vehicle’s components. Whether you are a new driver, own a high-end car, or simply want a stress-free ownership experience, you must get this add-on with your comprehensivecar insurance policy. Additionally, with platforms like PhonePe, purchasing & managing your car insurance becomes easier and hassle-free!