Buying Zero Dep Car Insurance
Zero depreciation also known as Nil depreciation or Bumper to Bumper Zero Dep car insurance is a car insurance policy that leaves out the depreciation factor from the coverage, thus giving you complete cover. It means that if your car gets damaged following a collision, no depreciation is subtracted from the coverage of wearing out of any body parts of car excluding types and batteries. The insurance company will pay out the entire cost of the body part for replacement.
Buying Zero Dep Car Insurance
Zero Dep car insurance policy offers 100% coverage for all fiber, rubber and metal parts without deduction of depreciation. It does not cover engine damage due to water ingression or oil leakage. Any mechanical breakdown, oil change or consumables are also not covered in this policy. The policy comes with a limit on the number of claims you can put in a year.
Zero depreciation costs anywhere between 15-20% of the standard premium and is a MUST BUY for all new or relatively new (up to 5 years) cars.
Zero Dep car insurance proves to be beneficial to:
People with new cars
People with luxury cars
New / Inexperienced drivers
People living in accident-prone areas
If you worry about small bumps and dents
If you have a car with expensive spare parts
Benefits of Zero Dep Car Insurance Cover
- Contrary to the popular belief that Zero Depreciation for Zero Dep car insurance is effective only for amateur drivers, it is essential for protecting even experienced drivers from the financial burden of damages and losses incurred due to accidents.
- Enhances the coverage of the basic Zero Dep car insurance, reducing your expenses to almost zero.
- Controls expenses incurred as a result of depreciation cost of the insured car, as per the prevailing market value.
- Expenses incurred due to repair or replacement of insured parts are settled without taking into consideration the depreciation value.
Factors to Consider Before Opting for Zero Dep Car Insurance Cover
Here are the factors you need to keep in mind while opting for a Zero Dep car insurance:
- The car that you want to insure should not be more than 3 years of age to be eligible for Zero Dep car insurance add-on cover.
- Only the depreciated value of the car parts are replaced on basic Zero Dep car insurance plans.
- Zero Dep car insurance offers a higher coverage than a basic car insurance plan, and therefore, attracts a higher premium. Therefore, you can consider zero depreciation car insurance only when you would be able to pay a higher premium amount.
- Zero Dep car insurance add-on is especially recommended for owners of luxury cars or car owners who are residents of high-risk locations.
- Claims on Zero Dep car insurance can be made in certain specific cases to limit the number of claims for minor issues like dents in the car.
- 50% depreciation is deductible on car batteries and parts of the car that are made of plastic, rubber and nylon, and 30% depreciation is deductible
- The deductible amount for depreciation on wooden car parts is determined by the age of car. The usual depreciation value is 5% in the 1st year, 10% in the 2nd year and so on.
Why Zero Depreciation is Better than a Normal Cover?
| PARAMETER | ZERO DEP COVER | NORMAL COVER |
|---|---|---|
| Claim Settlement | Offers settlement coverage without considering the depreciation value. | Claim amount is based on the current value of the vehicle, which factors in depreciation. |
| Premium | High | Low |
| Cost of Repairing and Plastic Fiber | Insurance Company Bears The Maximum Amount | Policy Holder Has To Pay More From Pocket |
| Age of the Car | Usually Covers New Car up to 5 years | It can be taken for a car less than 15 years |
This depends from insurer to insurer. Some insurers do offer zero dep cover for cars more than 5 years. But offline. After 15 years, the car would have to be re-registered.
The Role of Zero Dep Car Insurance during Claim Settlement
If you check the fine print of a comprehensive plan, you would know that the depreciation deducted on many items amounts to quite a lot.
Claim Settlement
For example, the Insurance Regulatory and Development Authority of India (IRDA) has ordained that:
- On rubber, nylon, and plastic parts, and batteries – 50% depreciation be deducted,
- On fiber glass components – 30% depreciation be deducted, and
- On wooden parts – depreciation be deducted as per the age of car (such as 5% in the first year, 10% in the second year, and so on.)
In case you make a claim, with a basic Zero Dep car insurance policy, the insurer only reimburses the depreciated value of car parts replaced.
This is irrespective of the actual cost. If your car is brand new, this can turn out to be really expensive!
How Much do You Pay from Your Pocket in Case of Claim?
Let’s run through this with a quick example. Say, your car is worth Rs. 10,00,000. Then the tentative cost of damage to the parts and its depreciation would look something like this:
| TENORS | COST OF DAMAGE (IN RS.) | COST OF DEPRECIATION (IN RS.) | [WITH ZERO DEP] AMOUNT (IN RS.) |
|---|---|---|---|
| Metal Part | 9,000 | 450 | 0.05 |
| Plastic Part | 12,000 | 6,000 | 0.5 |
| Fibreglass Parts | 3,000 | 900 | 0.3 |
| Windscreen | 2000 | 0 | 0 |
| Labour | 4,000 | 0 | 0 |
| Total | 30000+ | 7350 |
Disclaimer: The above cost is just an assumed figure and the actual cost will vary as per the extent of damage caused by the accident and the depreciation factor applied by the insurance company. The depreciation factor varies from insurer to insurer.
For such a scenario, with a normal standard policy, you’d have to pay Rs. 7,350 approximately. However, when zero depreciation comes into the picture:
| COST OF PREMIUM AND CLAIM | [WITHOUT ZERO DEP] AMOUNT (IN RS.) | [WITH ZERO DEP] AMOUNT (IN RS.) |
|---|---|---|
| Basic Premium (A) | 15,000 | 15,000 |
| Zero Dep Add-on (B) | 0 | 3000 |
| Total Cost of Policy (C) A + B | 15000 | 18000 |
| Deductible applied per claim* (D) | 2,000 | 2,000 |
| Cost of Repair(E) | 30,000 | 30,000 |
| What you need to pay(F) | 7,350 | 0 |
| Your total expenses in the year (G) | 24,350 | 20000 |
| You save (E-G) | 5,650 | 10,000 |
Disclaimer: The above cost is just an assumed figure and the actual cost will vary as per the extent of damage caused by the accident and the depreciation factor applied by the insurance company. The depreciation factor varies from insurer to insurer.
Thus, even if you have more than one claim in a year, you will definitely save a lot on account of the zero depreciation add-on!
What Factors Affect the Zero Dep Car Insurance Premium?
Car Insurance Premium
After a lot of statistical research and data crunching, your Zero Dep car insurance premium depends on 3 main factors:
- Age of the car
- The model of the car
- The location in which you are based
Read Also: Best Benefits of Multi-Year Two Wheeler Insurance 2022
Who should Buy Zero Depreciation Cover?
Ideally, Zero Dep car insurance cover is for people with brand new cars (or even relatively brand new would do), but specifically:
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- People with luxury cars
- New drivers
- People living in accident-prone areas
- If you worry about small bumps and dents
- If you have a car with expensive spare parts
Now that you fully understand the benefits of a zero depreciation add on, why not go ahead and buy it.
Rate of Depreciation in Vehicles
| AGE OF CAR | RATE OF DEPRECIATION |
|---|---|
| Less Than 6 Months | 5% |
| More Than 6 Months to 1 Year | 15% |
| More Than 1 Year to 2 Years | 20% |
| More Than 2 Years to 3 Years | 30% |
| More Than 3 Years to 4 Years | 40% |
| More Than 4 Years to 5 Years | 50% |
| More Than 5 Years | To be mutually decided between insurer and policyholder |
Rate of Depreciation in Vehicles – Metallic Parts
| 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% |
How is Zero Depreciation/Nil Depreciation Different From a Standard Comprehensive Cover?
Below is the table highlighting key differences between Zero Depreciation Cover Vs. Standard Comprehensive Car Cover.
| PARTICULARS | ZERO DEPRECIATION CAR INSURANCE | COMPREHENSIVE CAR INSURANCE |
|---|---|---|
| Meaning | An optional add-on while buying Comprehensive Car Insurance. This will ensure the insurance company does not deduct depreciation of car parts before settling the claim for the damages to your car. | A bundle of Third-party Liability Plan and Own Damage Plan. Several add-ons can be included to make it exclusive; however, it considers the depreciation of car parts before settling the claim. |
| Premium | There is a slight increase in car insurance premium but ensures there is no depreciation of car parts during claim settlements. | The premium for the standalone Comprehensive Policy is lower than a policy that has add-ons such as Nil or Zero Depreciation. |
| Age of Car | The add-on can be purchased for cars that are less than 5 years old. | The Standalone Comprehensive Car Insurance can be purchased for cars that are less than 15 years old. |
| Depreciation Factor | Depreciation of car parts is not considered while settling claims except for compulsory deductibles. | Insurers consider depreciation of car parts while settling claims. |
| Savings | While the premium you pay might be slightly higher, the cost of paying for the depreciation of car parts is nullified. | While the premium is lower than that of Zero Dep Car Insurance, you get to save only on the premium you pay. |
| Cost of repairing parts | The cost is borne by the insurance company (such as ACKO). | The cost has to be borne by you. |
Reasons to opt Zero Depreciation plan
The Zero Dep Car Insurance plan enhances your Comprehensive policy with additional coverage. When you opt for the Depreciation Waiver cover, you enjoy a higher claim amount during settlement. Here are a few reasons to get Depreciation Shield coverage.
Zero Depreciation plan
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Did you know that the value of any brand new car under the age of 6 months is reduced by 5% the moment it leaves the dealer’s showroom? This is because the value of a car begins decreasing due to wear and tear with time. The Depreciation Shield will help you get the car part’s full cost if damage occurs within the first 6 months.
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Many car owners treat their cars with utmost care and cannot tolerate even minor damages like a scratch or small dents. If you are one of them and don’t wish to spend money on these repairs, then opting for a Zero Depreciation cover is a good idea. Any accidental damage can be claimed and we will pay the repair cost without factoring depreciation.
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Usually, people prefer practicing on second-hand cars if driving is a newly acquired skill. Sometimes, it may happen that an inexperienced driver wishes to drive a new car. Here the risk of damage is higher as the person may not be well versed with driving. The Zero Dep Plan will ensure maximum insurance coverage if the new car gets damaged.
Who should consider buying a Zero Dep Car Insurance Plan?
A Zero Dep Car Insurance plan is perfect for you if you fall into any of the following categories.
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If you don’t have a dedicated parking space, the chances of damage increase. The Zero Dep plan will help you cover repair costs for such damages.
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If you are living in a high-risk area or new to driving a car.
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Buy the Zero Depreciation Plan if you have recently learned how to drive a car.
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If you own a luxury or expensive car with costly car parts.
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If you are someone who wishes to reduce out-of-pocket expenses in case of car damage.
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Opt for a Zero Dep cover if you need to repair minor damages to keep the car in a top notch condition.
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If you are worried about small dents and bumps or expensive spare parts.
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