What Is Zero Depreciation In Car Insurance?

Zero depreciation cover is also known as the NIL depreciation cover. It is an add-on that ensures the policyholder can claim the full amount under their comprehensive auto insurance policy and is exempt from paying the depreciation value of the damaged or replaced items.

In the case of motor insurance, depreciation refers to the decline in the value of a vehicle due to various factors such as ageing, malfunction or some other issue. In general, all vehicles are depreciating assets, a new car will be of higher value as compared to an old one.

With an insurance policy without zero depreciation cover, the policyholder may not get the full amount of the part replacement as insurers only pay for the replaced parts after deducting the depreciation amount. The insured has to pay for the remaining amount.

In such cases, choosing Zero Depreciation for car insurance could be a better option as it allows the insured person to get the maximum reimbursement during the time of claim process.

Benefits of having Zero Depreciation cover:

The add-on coverage benefits luxury car owners by lowering the cost of repairs or replacements of expensive parts.

For people living in places with a high risk of accidents, having this insurance protects the customers from high expenses during the repairs.

Owners of new vehicles must add zero depreciation cover, as it will help to maintain the value of their car even after an accident.

In regions that frequently experience flooding and severe rain, cars are vulnerable to water damage. In these kinds of weather, zero depreciation coverage is helpful.

New drivers are more prone to accidents. Having Zero depreciation cover could help reduce the financial burden if a collision happens.

It brings mental peace: You don’t have to worry about the expenses if anything happens to your vehicle

Factors to consider before opting for Zero Depreciation cover:

Age of the vehicle: The older your vehicle, the higher the Zero depreciation cover will cost. This add-on applies to cars under the age limit of 3 years and is not advisable to pay high premiums for a car older than three years.

Only a certain number of claims can be made under the Zero depreciation cover. This is to prevent customers from filing claims for minor dents in their cars.

Check the Insurance Regulatory and Development Authority of India (IRDAI) rate of depreciation for every part. In case, a user makes a claim using a basic insurance policy, as per IRDAI, on Nylon, Plastic parts and batteries – 50 per cent depreciation will be deducted. For fibreglass components, 30 per cent depreciation will be deducted.

Fuel type: The premium of a zero depreciation cover varies based on the vehicle’s fuel type i.e. Petrol, Diesel, CNG or Electric.