How Does Zero Depreciation Cover Impact Your Car Insurance Claim?

Many vehicle owners believe that their insurance will cover everything following an accident. However, most of the time this is not the case. Most regular car insurance's compensation is based on the depreciated value of your car rather than the original value.

Zero depreciation cover is here to help and avoid those unforeseen on-ground costs during the claims process, particularly on parts like bumpers, doors, or plastic fittings. If you ever think why your friend received a better claim settlement for the same damage/loss, this may be the add-on you were missing. Continue reading to see how this could change your claim experience entirely.

What Is Zero Depreciation Cover in Car Insurance?

Zero depreciation cover (sometimes referred to as "zero dep" or "nil depreciation" cover) is an optional add-on to your car insurance policy that will pay the full cost of repairing or replacing the damaged parts on your car.

Zero depreciation cover differs from standard comprehensive policies, which will adjust your claim based on the age of the parts and any wear and tear. If you are covered under a zero dep option, you will get back the whole amount for the cost of the repair, as well as the cost of the parts, including plastic, rubber and fibre parts.

Zero depreciation car insurance is particularly beneficial for newer cars or luxury vehicles, as it increases the chances of the claim amount not affecting your out-of-pocket expenses after an incident; however, a zero depreciation cover usually means a higher premium, which may limit the claims available.

How Does Your Claim Amount Change with Zero Dep Cover?

Zero depreciation cover affects how much money you will receive when you have a claim. If you don't have this cover, your insurer will deduct depreciation on parts as they settle your claim. When you have zero depreciation, your insurer will not deduct depreciation.

Let's break that down clearly.

Without Zero Dep Cover: You Pay for Depreciation

Every part of your car depreciates over time. This means that it loses inherent monetary value. Suppose your vehicle gets damaged and needs a certain number of parts replaced. In that case, the insurance company will consider how old the parts are and reduce the amount of the claim according to a set depreciation value for that part.

So even if you are insured comprehensively, the insurance company will only pay you the depreciated value of the parts, not the actual cost. That means you'll have to pay the rest out of pocket.

With Zero Dep Cover: No Depreciation Deductions

If you include zero dep cover, the insurer will replace them with new parts regardless of age. So if a bumper, door, or headlamp is damaged, you will not lose money due to wear. This increases your claim amount. You pay significantly less on your side, even for larger repair costs.

Let's Look at a Realistic Example

Suppose your car meets with a minor accident and the front bumper, side mirror, and headlight need replacement.

Particulars

Without Zero Dep Cover

With Zero Dep Cover

Bumper Cost (Dep. 50%)

₹10,000 → ₹5,000 paid

₹10,000 fully paid

Side Mirror (Dep. 40%)

₹5,000 → ₹3,000 paid

₹5,000 fully paid

Headlight (Dep. 40%)

₹8,000 → ₹4,800 paid

₹8,000 fully paid

Total Paid by Insurer

₹12,800

₹23,000

Out-of-Pocket by You

₹10,200

₹0

This is a simplified example, but it shows the massive gap in claim amount. Even with a comprehensive policy, you can cover thousands independently without zero dep.

Who Should Consider Adding This Cover?

Zero depreciation cover is beneficial as an add-on to your car insurance policy if you want complete protection against depreciation costs when making a claim. The following categories of car owners should particularly consider adding zero depreciation cover:

• New Car Owners: New cars lose value relatively quickly, and car parts depreciate over time. Zero depreciation cover can mean repairs and replacement parts will be paid for without the depreciation costs included.

• Luxury & Expensive Car Owners: Replacement parts for luxury and high-end cars are often extremely expensive. This cover can save a considerable cost and be the difference between claiming for a price and not, because depreciation is taken away from claiming the full expense.

• Sports Car Owners: High-performance sports cars and their components can include expensive parts, making zero depreciation cover a valuable option to outweigh the expense of repairs or replacement.

• New or Inexperienced Drivers: They are considered a higher risk, and the zero depreciation cover provides peace of mind due to the full repair costs.

• Drivers living in high-risk areas or with a higher likelihood of accidents: The zero-depreciation cover offers additional protection because of the greater likelihood of damage claims.

Things to Know Before You Buy Zero Dep Cover

There are a few essential aspects that you need to know before purchasing a zero depreciation (Zero Dep) cover for your car insurance:

• It is only available for New or Middle-Aged Cars: Zero-dep coverage is frequently only offered to those with a vehicle under five years of age. Some insurers will extend the cover to seven years, but your choices decrease as your car ages.

• There is a limit on the number of claims: You may not be entitled to unlimited zero-dep claims in a year. With most insurers, you are allowed only one or two zero-tps claims during the policy term.

• It Raises Your Premium: You also pay 10% to 20% more for the adder to your premium. However, if you have to make a claim, it usually allows you to save more than you pay, especially if a repair involves many parts.

• Doesn't Cover Engine Damage or Wear and Tear: Zero dep only waives the depreciation on parts and not the car's depreciation in general. There is no coverage for engine oil, etc, tires, batteries, and mechanical breakdowns caused by accidents.

• You Still Have to Pay Deductibles: Zero dep doesn't mean your claim is completely cashless. You must still pay your mandatory and voluntary deductible for your base policy agreement.

• Only Works with Comprehensive Plans: If you only have third-party insurance, you can't buy zero dep. It's an add-on benefit for cars insured under comprehensive car insurance.

• More Benefits of Costly Repairs: If your car is a substantial parts value, or less than 5 years old, zero dep helps you evade significant out-of-pocket expenses after an accident or damage.

Zero depreciation cover can be a significant benefit when the time comes to make a claim. Instead of losing some of your value to part depreciation, you get a larger and fairer payout from your claim. This can be especially handy if you drive a new or high-tech car and don't want repair bills as a surprise.

On top of the possible low cost, you may save more on your repairs with this add-on, even for a smaller cost on your premium. If you want complete peace of mind with your claim, this is a worthwhile cover for your policy.

(Disclaimer: The above press release comes to you under an arrangement with NRDPL and PTI takes no editorial responsibility for the same.). PTI

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