What Is Zero Depreciation In Car Insurance?
2022-02-23 16:56:47When you buy a car, it comes with lots of responsibilities. Even with insurance, it's crucial to drive safely and responsibly. Safe driving not only helps you save on premiums with a no-claim bonus (NCB) but also reduces what you might pay out of pocket when making a claim.
Many people don't know that insurance might not cover the full cost of repairs or replacement based on the car's original price. If you are one of them, this blog is for you. In this blog, we'll explain the concept of zero depreciation in car insurance to help you understand why.
What is Zero Depreciation in Car Insurance?
Zero depreciation is known as bumper-to-bumper or nil insurance cover. It is an add-on cover to a comprehensive car insurance policy and a stand-alone own-damage policy. Under zero dep car insurance, the insurer will not charge any depreciation that the insured car has sustained. In simple terms, under zero depreciation car insurance, a policyholder can get a claim of the total cost for repair or replacement of car parts in case of damage to the car due to an accident. The depreciation value on the damaged parts will not be subtracted from the claim amount.
Thus, a huge amount can be saved. Moreover, this cover applies to vehicles that are up to 10 years old, and the policyholder can use it unlimitedly (subject matter of insurance company) during the buy a car insurance policy.
What are the Benefits of Zero depreciation Car Insurance?
Here are the key zero depreciation car insurance benefits:
- Full Claim Settlement: With zero depreciation in car insurance, the insurer covers the full cost of repairs or replacements without considering the depreciation of parts. This means you won't have to pay for the reduced value of your car parts.
- Higher Savings: Since the insurance covers the full cost of parts, zero dep car insurance helps reduce your financial burden during claims. This is particularly beneficial for newer cars, where the cost of parts can be high.
- Peace of Mind: Zero depreciation car insurance gives you confidence and peace of mind, knowing you are fully protected. You don't have to worry about unexpected costs due to the depreciation of your car's parts over time.
- Better Car Value Maintenance: By ensuring all parts are replaced with new ones without any reduction in the claim amount due to depreciation, this coverage helps maintain the overall value of your car.
Who can Get Zero Depreciation in Car Insurance?
Zero depreciation car insurance is available to many car owners, but there are some criteria to consider:
1. Car's Age
Zero dep car insurance is usually offered for new cars or those up to 7 years old. Some insurers might extend this cover to slightly older cars, but this is less common.
2. Type of Vehicle
Most passenger cars, such as sedans, SUVs, and hatchbacks, can get zero depreciation coverage. However, this cover may not be available for commercial vehicles or very old models.
3. Driving History
A clean driving record can make it easier to get zero depreciation car insurance. Insurers might offer better terms to drivers with fewer claims or accidents.
4. Preference for Full Protection
If you want full protection and want to avoid paying for the depreciation of your vehicle's parts, zero depreciation coverage is a good option.
Difference Between Zero Depreciation Cover and Comprehensive Coverage
The depreciation that is applied to the vehicle for the purpose of IDV calculation is chargeable as per the following standard schedule fixed as per IRDAI below:
| Aspect | Zero Depreciation Cover | Comprehensive Coverage |
| Depreciation | No depreciation is deducted; the full claim amount is settled. | Depreciation is deducted based on the age of the car parts. |
| Premium Cost | Higher than standard comprehensive insurance. | Lower premium cost compared to zero depreciation cover. |
| Coverage | Covers the full cost of repairs and replacements without considering depreciation. | Covers repairs and replacements but deducts depreciation from the claim amount. |
| Out-of-pocket costs | Minimal out-of-pocket expenses for part replacements. | Higher out-of-pocket expenses due to depreciation. |
| Eligibility | Typically available for cars up to 5 to 10 years old. | Available for all cars, regardless of age. |
How is Zero Depreciation car insurance premium determined?
The premium for zero depreciation car insurance depends on several factors:
1. Car's Age
Newer cars have lower premiums for zero depreciation coverage. Older cars may have higher premiums or may not qualify for this add-on.
2. Model and Make
The premium varies based on the car's make and model. Luxury or high-end cars typically have higher premiums due to the higher cost of parts.
3. Location
Where you drive and park your car matters. Cars in cities or areas with higher risks of theft or accidents might have higher premiums.
4. Insurer's Terms
Different insurers have different terms and conditions for zero dep car insurance, which can affect the premium. Some insurers may offer discounts or bundled packages that include zero depreciation coverage.
5. Claim History
If you've made several claims in the past, your premium might be higher. Insurers often charge more for zero depreciation coverage if you have a history of frequent claims.
Depreciation Rates in Car insurance
Depreciation rates in car insurance refer to the decrease in the value of your car’s parts over time, which affects the claim amount. Here’s a basic overview:
1. Rate of Depreciation for All Parts Approved by IRDAI
| Car Parts | Rate of Depreciation |
| Rubber/Plastic/Nylon/Batteries | 50% |
| Fibre Parts | 30% |
| Wooden Parts | 5% in the first year, 10% in second year and so on. |
2. Rate of Depreciation in Vehicles (IDV)
Know - How To Derive IDV?| 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 the insurer and policyholder |
3. 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% |
Conclusion
In the end we have concluded that zero depreciation car insurance covers the full cost of repairs or replacements without deducting for depreciation. It’s best for newer cars, as it lowers your out-of-pocket costs and helps keep your car's value. This type of insurance gives you financial protection and peace of mind, making it a good choice for car owners who want strong coverage.
Is the bumper covered in zero depreciation?
Yes, the bumper is covered in zero dep car insurance without any depreciation.
Does IDV matter with zero depreciation?
Yes, the Insured Declared Value (IDV) still determines the maximum claim amount.
Is the engine covered in zero dep car insurance?
The engine cover varied in different situations. For example, if your engine is damaged in an accident, your engine is covered by the insurance company.
How many times can I claim zero dep insurance?
Usually, you can claim zero depreciation insurance unlimitedly (subject matter of insurance company) during the policy term.
Is the airbag covered by zero DEP insurance?
Yes, airbags are covered without depreciation.
Can I claim insurance for car scratches?
Small scratches usually aren't covered unless they happen because of an accident.
