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How Zero Depreciation Cover Can Help During Car Insurance Claim Settlement?

Written by Sharad Bajaj

Updated On Oct 14, 20232 min read

Zero depreciation add-on cover brings a lot of benefits for policyholders. Let us understand how it is important for your car insurance policy.

Every vehicle faces depreciation with time, which brings a reduction in its value and parts over time due to wear and tear. In case of an insurance claim, the car insurance provider offers compensation based on the depreciated value of the vehicle and its parts, which will make you get a lesser amount of compensation.

You can avoid the effect of depreciation on your insurance claims by choosing a zero depreciation add-on with your comprehensive car insurance policy or standalone own-damage insurance plan. This optional coverage will make you receive the complete compensation for the replacement of vehicle parts that will ensure higher payouts by the insurance company and lower out of pocket expenses from your end, in case of any car insurance claim. Let’s understand the zero depreciation car insurance add-on cover to enjoy it without any hassle.

What Is Zero Depreciation?

Zero depreciation is also known as Bumper to Bumper or Nil Depreciation car insurance is a car insurance add-on cover which keeps the depreciation factor out of the coverage and offers you complete insurance cover. With the zero depreciation add-on cover, if your car faces any damage due to an accident or collision, no depreciation will be deducted from the insurance coverage of wearing out of any body parts of your insured car excluding tyres and batteries. The insurance provider will pay out the complete amount of body part replacement.

Zero depreciation car insurance add-on cover provides 100% insurance coverage for all fibre, rubber and metal parts without imposing any deduction of depreciation cost. Zero depreciation add-on cover costs around 15-20% of the standard amount of premium and is available for cars up to 5 years of age. It makes it beneficial for people with new cars, people owning luxury cars, new or inexperienced drivers, individuals living in accident-prone areas, cars with expensive spare parts and so on.

Benefits of Zero Depreciation Car Insurance Cover

Here are some benefits which can be availed with the zero depreciation add-on cover:

1. Helps Save Money – Zero Depreciation add-on cover ensures that you will not have to pay money from your pocket in case of a claim. Without zero depreciation add-on cover, the depreciation cost on the car parts are to be borne by you, but with this cover, it will be taken care of by your insurer.

2. Higher Claim Amount – When you secure your car with the zero depreciation add-on cover, it means the depreciation cost on the parts of your car would not be computed and therefore, you will be entitled to get a higher claim amount during the insurance claim settlement.

3. Brings Peace of Mind – The inclusion of a zero depreciation add-on cover in your car insurance plan ensures that you need not spend money from your pocket to pay for the replacement of car parts during insurance claims. This assurance brings a lot of joy, satisfaction and peace that someone has got your back during tough times.

Role of Zero Depreciation Car Insurance During Claim Settlement

When it comes to claiming settlement of car insurance, the rate of depreciation on the parts of a car is computed differently with zero depreciation add-on cover. Below is the clear display of depreciation rates of car insurance without zero depreciation and rate of depreciation for car insurance with zero depreciation:

Age of Car	Rate of Depreciation Without Zero Depreciation cover	Rate of Depreciation With Zero Depreciation cover
Under 6 months	Nil	0%
6 months to 1 year	5%	0%
1 – 2 years	10%	0%
2 – 3 years	15%	0%
3 – 4 years	25%	0%
4 – 5 years	35%	0%
5 – 10 years	40%	0%
Above 10 years	50%	0%

(Source: The Insurance Regulatory and Development Authority of India (IRDAI))

With zero depreciation cover, the rates of depreciation for car insurance are applicable as mentioned below during the claim settlement:

On rubber, plastic parts, nylon and batteries – 50% depreciation is applicable,
On fibreglass parts and components – 30% depreciation is applicable

These rates are applicable with zero depreciation add-on cover, otherwise, with a standard car insurance plan, the insurance company tends to reimburse only the depreciated value of the replaced parts of a car.

Conclusion

Zero Depreciation is one of the most useful car insurance add-on covers. It helps you get a complete claim amount during the claim settlement without default deduction of depreciation. To enjoy this cover, you should go through its details and benefits mentioned above in the article. It will also let you know as to how this cover can help you during the claim settlement of your car insurance.

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard. – When you secure your car with the zero depreciation add-on cover, it means the depreciation cost on the parts of your car would not be computed and therefore, you will be entitled to get a higher claim amount during the insurance claim settlement.

Disclaimer

This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

Written by Sharad Bajaj

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Sharad is an insurance industry veteran who has managed motor insurance products for over a decade. He helped set up and scale the motor insurance vertical for a leading insurance company in his previous stint. In his spare time, Sharad likes to read and be in tune with nature.